The €175,000 income threshold can determine whether parents receive parental allowance. Early tax planning of relevant income, deductible items and payment dates helps clarify whether the income threshold is met. ACCONSIS supports expectant parents in making targeted and economically sensible use of legally permissible planning options.
What does the €175,000 income threshold mean?
For births from 1 April 2025, there is no entitlement to parental allowance if the relevant taxable income exceeds €175,000. This is regulated by Section 1(8) of the German Federal Parental Allowance and Parental Leave Act (BEEG).
This income threshold applies uniformly to couples and single parents. For parents living together, the taxable income of both parents is generally added together.
However, taxable income for this purpose is not the same as gross income. The starting point for calculating the income threshold in relation to parental allowance is the parents’ taxable income sources.
From this amount, deductible items are subtracted, in particular eligible:
- employment-related expenses,
- special expenses,
- pension and insurance contributions,
- allowances, and
- extraordinary financial burdens.
The relevant amount is usually shown in the income tax assessment notice.
More than €175,000? No parental allowance!
Even a slight excess over the relevant amount of €175,000 is significant. If taxable income is even marginally above €175,000, the entitlement to parental allowance is lost completely. There is no form of gradual reduction. For earlier periods, the transitional provisions under Section 28 BEEG apply.
A reliable forecast is therefore particularly important where income fluctuates, where remuneration is performance-related or where larger one-off effects are expected.
Note: Current information on the income threshold is available on the Federal Government’s Family Portal.
What is the relevant period for calculating the income threshold?
The relevant period for calculating income as the basis for the parental allowance decision is generally the calendar year before the birth. If a child is born in 2027, for example, the taxable income for 2026 will generally be decisive.
This means that parental allowance planning should, where possible, begin in good time before the end of the year preceding the birth. Once the relevant calendar year has already ended, many economic decisions can no longer be implemented effectively.
How is the relevant income calculated?
In a first step, the expected income of both parents for the relevant calendar year is determined. In addition to employment income, this may include income from, for example:
- self-employment,
- rental income,
- investments or participations, and
- taxable disposal transactions.
Bonuses and other one-off payments can also change the forecast and should therefore be taken into account or planned accordingly.
In a second step, it is necessary to examine which expenses and deductible items can be recognised for tax purposes. Depending on the personal situation, these may include, for example:
- work-related expenses,
- contributions to pension and basic provision schemes,
- donations,
- childcare costs, and
- extraordinary financial burdens.
Existing loss carryforwards and losses from individual categories of income may also be relevant.
First, the expected taxable income is calculated without any further measures. Realistic planning options are then simulated and their tax and economic effects compared.
A sufficient safety buffer should also be factored in, as income or deductible amounts may still change before the end of the year.
Note: Not every private expense reduces taxable income.
What role do income and expense planning play?
It is also possible to examine whether income or already planned expenses can be timed within the legal framework in such a way that the relevant €175,000 threshold is not exceeded during the relevant assessment period.
For employees, this may concern variable remuneration components, for example. For self-employed individuals, landlords or entrepreneurs, further timing options may be available, depending on the type of income.
Note: The requirement is always that the relevant measure is legally permissible, actually implemented and economically sensible.
However, the aim should not be merely to trigger “unnecessary” expenses in order to obtain parental allowance. What matters is the comparison between the economic cost of a measure, its tax effect and the possible entitlement to parental allowance.
A planning measure that reduces income on paper but leads to higher overall costs is usually not sensible.
When should advice on parental allowance begin?
Advice should ideally begin as soon as the expected due date and income development can be assessed. This enables reliable financial planning at an early stage and, where appropriate, makes it possible to take sensible, legally compliant steps to secure reliance on parental allowance.
This is particularly important for entrepreneurs, self-employed individuals, shareholders, landlords and employees with variable remuneration. Shortly before the end of a year, sensible measures are often only possible to a limited extent.
For the later application, the required tax returns should also be prepared early, and all supporting documents should be fully documented. The parental allowance office decides independently on the entitlement, and a tax forecast cannot predetermine that decision. However, the tax forecast creates transparency regarding the relevant figures and reduces avoidable uncertainty.
Conclusion: plan early for parental allowance
For parental allowance, tax planning in the calendar year before the birth can already be decisive.
Anyone approaching the €175,000 income threshold should therefore check at an early stage which taxable income is likely to be relevant and which permissible planning options exist. The overall economic situation should always remain the central consideration.
ACCONSIS supports you as your tax adviser in planning around the income threshold for parental allowance. We determine the expected taxable income, identify legally permissible planning options and compare their costs and benefits. This gives you a sound basis for decision-making before binding measures are implemented.
Questions about tax planning related to parental allowance?
If you have any questions about the income threshold for parental allowance and potential tax planning options, I will be happy to assist you.
Simply arrange an appointment using the booking options shown alongside.
Yours sincerely,
Lucas Bürner
Your ACCONSIS contact
Lucas Bürner
Dipl.-Finanzwirt (FH)
Tax consultant
Service phone
+49 89 547143
Email
l.buerner@acconsis.de
FAQ – answers to frequently asked questions about parental allowance and the income threshold:
What is the income threshold for parental allowance?
For births from 1 April 2025, there is no entitlement to parental allowance if the relevant taxable income exceeds €175,000.
Is gross income decisive for the threshold?
No. The decisive factor is taxable income. After taking tax deductions into account, this is generally lower than gross income.
How can taxable income be planned?
Depending on the individual situation, it may be possible to review employment-related expenses, pension and insurance contributions, special expenses, losses and the timing of certain income or expenses.
When should tax planning for parental allowance begin?
Advice should ideally begin early in the calendar year before the birth. The closer the end of the year comes, the fewer planning options can usually still be implemented.
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