Relief Through the Abolition of Cold Progression: Understanding the Impact
The planned total volume for tax relief in the year 2024/25 amounts to 1.989 billion euros. Two-thirds of this amount (1.338 billion euros) will be used to automatically increase the tax brackets of the income tax tariff by 3.33 percent. Now, the threshold amounts relevant for the application of the first five tax brackets are set to be further adjusted by an additional 0.5 percentage points, resulting in the following increases:
– the first tax bracket to 13,308 euros,
– the second tax bracket to 21,617 euros,
– the third tax bracket to 35,836 euros,
– the fourth tax bracket to 69,166 euros, and
– the fifth tax bracket to 103,072 euros.
The remaining third, 651 million euros, will be used for the following measures: a complete adjustment of deductions to the inflation rate, including the single earner deduction, single parent deduction, maintenance deduction, transportation deduction, increased transportation deduction for commuters, supplement to the transportation deduction, and pensioner deduction.
Raising Daily and Overnight Allowances and Mileage Reimbursement
Additionally, daily allowances are set to increase to 30 euros and overnight allowances to 17 euros. Mileage reimbursement will be uniformly increased to 50 cents per kilometer for cars, motorcycles, and bicycles. Currently, the mileage reimbursement is 42 cents for cars, 24 cents for motorcycles, and 38 cents for bicycles. A rate of 0.15 euros per kilometer can be claimed for accompanying passengers. Moreover, the current cap for bicycle mileage reimbursement will be doubled from 1,500 to 3,000 kilometers per year, while the minimum for pedestrians will be halved to 1 kilometer.
Enhancing and Attracting Reimbursement for Public Transport Use
To promote the use of public transportation, subsidies for business trips will be increased and clearly regulated. For the first 50 kilometers, 0.50 euros will be provided, for the next 250 kilometers, 0.20 euros, and for every additional kilometer, 0.10 euros will be allocated.
Support for Small and Medium-sized Enterprises
The threshold for small businesses in income and sales tax will be raised from 35,000 euros to 55,000 euros. This is a crucial step in supporting our small business owners and contributing to the promotion of entrepreneurship.
Indexing the Threshold for Other Benefits
The thresholds for other benefits, currently at 620 euros, for the 13th and 14th monthly salaries, will be indexed. As of 2025, automatic annual adjustments will be ensured.
Improvements in Service Apartments
Another commendable measure is the new regulation in the area of service apartments. The tax-free living space will be raised from 30 m² to 35 m², better meeting the needs of many employees. Additionally, instead of fully attributing communal areas, a proportional distribution per unit to each employee will be implemented.
Financial Support for Low-Income Households
Of particular note is the planned financial support for low-income households with children in the form of a deduction for employed single earners and single parents with an annual income of (currently) up to 24,500 euros, amounting to 60 euros per child per month. This measure contributes to combating child poverty and promoting equal opportunities.
Impact of Abolishing Cold Progression
The abolition of cold progression through the adjustments in tax brackets and deductions will have a significant impact on taxpayers. By automatically increasing the tax brackets by 3.33 percent and adjusting the threshold amounts, individuals will benefit from a more accurate reflection of their income levels, preventing them from being pushed into higher tax brackets due to inflation.
Furthermore, the complete adjustment of deductions to the inflation rate ensures that taxpayers can maintain the real value of their deductions, providing them with more financial stability and support in meeting their expenses.
Support for Public Transportation and Small Businesses
The increases in daily and overnight allowances, as well as the uniform raise in mileage reimbursement rates, aim to incentivize the use of more sustainable modes of transportation, such as public transport, bicycles, and walking. By providing higher reimbursements for these modes of travel, individuals are encouraged to reduce their carbon footprint and contribute to a greener environment.
Moreover, the raise in the threshold for small businesses in income and sales tax acknowledges the importance of these enterprises in driving economic growth and creating job opportunities. By providing them with more financial leeway, small businesses can invest in expanding their operations and hiring more employees, ultimately benefiting the economy as a whole.
Conclusion
In conclusion, the abolition of cold progression and the various measures implemented to provide tax relief and support for different sectors of the economy demonstrate a commitment to promoting fairness, sustainability, and economic growth. By ensuring that taxpayers are not unduly burdened by inflation and by incentivizing environmentally friendly practices, the government is taking proactive steps towards building a more resilient and inclusive society. Through these initiatives, individuals, businesses, and the environment stand to benefit, paving the way for a brighter future for all.
