Following the dismissal of Federal Finance Minister Christian Lindner by Federal Chancellor Olaf Scholz in November, the traffic light coalition of SPD, FDP and Greens finally collapsed. The lost vote of confidence will be followed by new elections at the end of February. The parties are therefore in election campaign mode and are outdoing each other almost daily with new election gifts for citizens. But before these are perhaps implemented, we need to take a look at the changes for 2025, which is only a few days old, because despite some relief, it will be significantly more expensive for many.
We have summarized the most important changes from a financial perspective for 2025.
Higher contribution rates, higher allowances
Higher contributions to health and long-term care insurance
It was only a matter of time before the costs of health and long-term care insurance rose significantly since the coronavirus pandemic and would sooner or later be passed on to contributors. At the end of December, there was finally certainty: many statutory health insurers have significantly increased their supplementary contribution for 2025. In some cases, this was more than doubled. On average, the supplementary contribution for health insurance rose from 2.0% to 2.5%. This means that insured persons will pay up to 17.1% of their gross salary for healthcare alone, with the contribution rate split equally between employer and employee.
Long-term care insurance will also be adjusted, rising by 0.2 percentage points from 3.4% to 3.6%. Here too, the rate is split equally between employer and employee. For singles, there is still an additional surcharge of 0.6 percentage points, which they must pay in full from their gross salary, bringing the total rate to 4.2%.
On the other hand, the income threshold will rise from 62,100 euros to 66,150 euros. Anyone who earns more than 5,512.50 euros gross per month will only pay contributions up to this limit; every additional euro will remain non-contributory.
Higher basic tax-free allowance
Depending on the salary level, however, the higher contributions for health and long-term care insurance can be offset by adjusting the basic tax-free allowance. This is because the basic tax-free allowance, and therefore the amount from which income tax must be paid, will also be increased in 2025. For singles, this will rise by 312 euros to 12,096 euros. An additional adjustment from 11,604 to 11,784 euros was already made retroactively in December, which was paid out retrospectively with the last monthly salary. This means that married couples and registered partners will only have to pay income tax this year from an annual income of 24,192 euros.
The increase also raises the amount from which the top tax rate (42%) applies. This will apply to single earners from 68,431 euros instead of the previous 66,761 euros. From an annual income of 277,826 euros, the 45% wealth tax will continue to apply.
Higher tax-free allowance, more child benefit
Families with children can look forward to a minimal increase in child benefit. From 01.01.2025, they will receive 255 euros per month per child, and this amount is set to rise by a further 4 euros in 2026. The child allowance, which is deducted from taxable income and thus reduces the tax burden, will be retroactively adjusted for 2024 and further increased for 2025. This amounts to a total of 6,672 euros for the current calendar year.
But be careful: there can be a considerable reduction in parental allowance. If the taxable annual income of a household is more than 175,000 euros, there will be no parental allowance at all from this year onwards. In 2024, this limit was still 200,000 euros. Over the next few years, this amount is to be gradually reduced to around 150,000 euros.
There is a positive change in childcare costs. From 2025, 80% of these costs can be claimed for tax purposes up to a maximum of 4,800 euros per child.
Higher salaries and pensions
Higher minimum wage
The statutory minimum wage will be raised again in 2025. From January 1, 2025, it will increase from the previous 12.41 euros per hour to 12.82 euros, meaning that low earners will benefit twice over from the higher exemption thresholds. The SPD and Greens are already campaigning for themselves and are promising an additional increase to 15 euros despite the independent commission. It is questionable whether they will be able to implement this election promise later.
At the same time, the monthly income limit for mini-jobbers will rise from EUR 539 to EUR 556, which will shift the earnings limit to EUR 6,672 per year. Pensioners, pupils, students or employees who want to earn extra money through a midi-job can continue to earn up to €2,000 at a reduced rate from January 1, 2025. Up to this income, employees only pay very low social security contributions. This will make additional income opportunities more attractive.
Higher pensions
Pensioners may also receive more money this year. According to the German government’s draft pension insurance report, old-age pensions are set to rise by 3.5% nationwide from July, the same rate as recently. There will then be 40.7 euros per pension point. The final decision is expected to be made in the summer when the final data on wage trends is available.
Contributors will pay a stable rate of 18.6% into the pension fund, but must expect a higher contribution assessment ceiling, which will be raised nationwide to 96,600 euros, an increase of 6,000 euros. This means that in future, contributors will pay pension insurance contributions on higher incomes.
Interesting for future pensioners: in order to be able to collect the same number of pension points over the next twelve months, they must have increased their income by 11% year-on-year, otherwise they will receive fewer pension points in future. The reason for this is the increase in average gross annual earnings, which have risen from 45,358 to 50,493 euros this year. Anyone earning at least this annual income will receive one pension point. If you earn less or more than this, you will receive fewer or more points on your pension account.
Higher taxes
CO₂ price increases
In addition, the CO₂ tax per tonne will rise from 45 to 55 euros. This will primarily affect the price of petrol and diesel as well as the heating costs of most households. The increase in price is likely to amount to around 3 cents per liter of fuel. Added to this is the multiple taxation due to the higher base price through sales tax and mineral oil tax, which will ultimately result in further price increases. Companies are also likely to pass on the higher CO₂ price. The Germany ticket for local public transport will also be significantly affected by this. This will rise from 49 euros to 58 euros per month. This corresponds to an increase of 18%.
New property tax
From January 2025, property tax will be levied according to new rules. The calculation will be based on the newly defined assessment rates of the municipalities and will require a revaluation of the properties. Although the basic factors (property value, property tax rate and assessment rate) used to calculate property tax will continue to apply, a standard land value and a statistically determined net cold rent will be used in future. This can mean a higher burden for many people.
Other
Furthermore, an exit tax will be introduced in 2025 for private investors who invest in funds and ETFs. Anyone wishing to emigrate in future who has invested more than EUR 500,000 in a fund will have to pay capital gains tax on this when they leave the country. However, the sum applies per ETF and fund and can therefore theoretically be easily avoided. In addition, banks will have to enable real-time incoming transfers from January 9th, and outgoing transfers from October 9th, at no additional cost to the customer.
Particularly important for traders: the loss offsetting limit for futures trading will be abolished again this year. Losses in excess of EUR 20,000 per calendar year can now be offset in full again, finally putting an end to the nonsensical taxation of turnover. This change will apply retroactively in all open cases.
Car insurance is also likely to become more expensive. Industry associations are warning of significant price adjustments due to the considerable rise in costs. Anyone who is obliged to submit a tax return must have submitted it to the tax office for 2024 by July 31, 2025. With a tax advisor, this is possible until April 30, 2026.
In summary: 2025 will be expensive
The changes for 2025 will bring with them many financial burdens – from higher taxes to an increased cost of living. But with the right planning, you can reduce the additional burden somewhat. For example, you should check whether it is worth switching to a different statutory health insurance scheme and, above all, you should continue to make your own independent provisions to counteract the worsening pension problems.
