After a year of political turmoil and new elections, the new federal government is slowly settling into its work. The first few months have been challenging, and new reforms are already on the horizon that will change the financial lives of all Germans. Before these reforms are implemented, or hopefully not, let’s take a look at the changes for 2026 that have already been decided. One thing is certain: the government and insurance companies will be digging deeper into their pockets.
We have summarized the most important changes from a financial perspective for 2026.
Higher contribution rates, higher allowances
Further increases in health and long-term care insurance
The health insurance landscape will become more complex and expensive in 2026, even though the general contribution rate for statutory health insurance will remain stable at 14.6% in nominal terms. This means that insured persons will now have to pay over 17.5% of their gross salary for healthcare alone. However, this is only half the story, as the additional contribution, which is levied independently by each health insurance fund, will increase significantly at the turn of the year. On average, this has risen by 0.4 percentage points from 2.5% to 2.9%, which means an additional annual contribution of around €200 for the average earner. It may therefore be worthwhile to switch providers.
In addition, there will be another increase in the contribution assessment ceiling from €66,150 to €69,750, which equates to an increase of just under 5%. This will particularly affect higher earners, as the maximum statutory health insurance contribution will exceed the €1,200 per month mark for the first time. In contrast, the contribution rates for nursing care insurance remained stable at 3.6%. However, experts are warning that these contribution rates could rise massively by 2030 – an alarming forecast for millions of insured persons who are already paying large sums for their health insurance.
Further increase in basic allowance
The basic allowance rose from €12,096 to €12,348 at the turn of the year, an increase of €252. This increase is required by constitutional law in order to protect the minimum subsistence level from taxation. This so-called indexation is intended to prevent inflationary effects from leading to a creeping tax increase, even though nominal incomes have not risen at all.
For an average earner with a gross income of €5,000, however, this only means an additional €15 per month – a sum that is hardly noticeable in everyday life. For higher incomes of €10,000 per month, the additional net benefit is just €20. At the same time, the exemption limit for the solidarity surcharge is being adjusted, but the overall effect remains a reduction in the low double-digit euro range per month.
While this is formally presented as a tax break, the real improvement in purchasing power is minimal and bears no relation to the price increases that households have had to endure since 2020.
Higher child allowance, more child benefit
Child benefit will increase by four euros per child per month from 2026 – from 255 euros to 259 euros. Many parents see this additional sum of 48 euros per child per year as symptomatic of a society that only half-heartedly supports its younger generation. While childcare costs in Germany have risen by 15 to 20% in real terms, school expenses for learning materials and travel tickets have increased, and food prices have risen massively, an increase of 48 euros per year seems almost cynical.
At the same time, the child allowance is rising to a total of €9,756 – an increase of €156 compared to 2025. Parents can choose in their tax return whether to use the child benefit or claim the allowance; it is not possible to do both. For higher-income households, the allowance is often advantageous because it leads directly to tax savings, while child benefit is more relevant for low-income earners.
Childcare costs remain deductible at 80% of the costs (up to a maximum of €4,800 per year).
Early retirement pension for children
One new feature is the introduction of a so-called early start pension for children, whereby every child will receive €10 per month in a retirement savings product from birth. The intention behind this program is commendable: by investing even small amounts early on, children can start building up assets while they are still young. By the age of 18, a child would then have accumulated around €2,160 plus compound interest, which could serve as start-up capital for adult life.
The model is based on international examples such as the UK (Child Trust Fund) and Singapore, where early savings policies for wealth accumulation are actually effective. The government’s claim that these savings plans should be “generous and unbureaucratic” suggests that administration should not be overly complicated. However, it remains unclear which financial products will be offered and who will be responsible for administration.
Higher minimum wage
The statutory minimum wage will be increased to €13.90 per hour on January 1, 2026—an increase of around 5% over the previous year. This increase is higher than nominal inflation and is intended to cushion the loss of purchasing power for low-income earners who are directly dependent on this minimum wage. Around 7 million people in Germany work in marginal employment or as mini-jobbers and will benefit directly from this adjustment.
The increase is (actually) not based on political discretion, but is linked to a formula that takes into account wage developments from two years ago – a system that is less volatile, but also means that crises are reflected in the minimum wage with a time lag.
We stand by our position: the minimum wage should not be increased, but abolished altogether!
Higher limits for mini-jobs
The earnings limit for mini-jobs will be raised to €603 per month in 2026 – a direct consequence of the minimum wage increase. The calculation is transparent: €13.90 per hour × 10 hours per week × 4.33 weeks per month equals the new limit. Linking the limit to the minimum wage makes the system predictable and gives both employees and employers clarity when structuring employment relationships. A particularly practical feature is the special rule that mini-jobbers may exceed this amount up to twice per calendar year without jeopardizing their status – for example, when unexpected orders come in or seasonal peaks need to be handled.
The so-called midi-job or sliding scale range describes employment relationships between the mini-job limit (now €603) and €2,000 monthly earnings. This segment was deliberately designed with reduced social security contributions to motivate employees to increase their hours beyond the mini-job limit without having to pay full social security contributions. With the new mini-job limit, the midi-job zone is also shifting upwards, but its function remains the same.
Pensions remain a cause for concern
The pension contribution rate will remain stable at 18.6% in 2026 – a signal that seems reassuring at first glance, because a further increase has been avoided. However, the contribution assessment ceiling (the earnings threshold up to which pension contributions are calculated) will rise by around 5% from €96,600 to €104,400. For higher earners, this means significant additional pension contributions – an employee with an annual income of €120,000 will pay an additional €400 per year into the pension fund.
The good news for pensioners, however, is the 3.7% pension increase on January 1, 2026, which is above the general inflation expectation of around 2% and will give pensioners a real gain in purchasing power. Another new development is that, starting in 2026, pensioners will be able to earn up to €2,000 tax-free – a limit that allows for more flexibility and opens up opportunities for older people to supplement their pensions by doing light work.
Nevertheless, the long-term outlook is bleak: experts are issuing stark warnings that significant increases in contribution rates may be necessary by 2030, possibly up to 20% or higher. This is an alarming prospect for those currently in work, whose future pension contributions will increase considerably as a result. The German pension insurance system is under enormous long-term pressure from an aging population and baby boomers who will soon be retiring en masse. This is not fair to future generations.
Taxes and duties
CO₂ price, electricity price, Germany ticket
The CO₂ price will be raised again in 2026, to around €65 per ton. This will again be reflected in gasoline and diesel prices – an additional 4 to 5 cents per liter – and will have an even greater impact on heating costs. At the same time, the Germany ticket will be increased again – to €63 per month. This is an increase of €5, or 8.6%. A total of 14 million users will be affected. From 2027, an automatic price index is to be introduced that links future price increases to cost drivers such as energy and personnel expenses.
The federal government will introduce a subsidy for electricity grid fees from 2026 to ease the burden on households. The planned relief is around 1 to 2 cents per kilowatt hour on average nationwide. That may sound small, but for specific households it means the following: A 2-person household with an annual consumption of 2,400 kilowatt hours will save around 31 to 48 euros per year, while a 4-person household with 4,000 kilowatt hours will save between 52 and 80 euros per year.
These reductions are noticeable, but must be viewed in relation to the electricity price increases of recent years: Electricity prices in Germany have risen by a total of 60 to 80% since 2021, which is why even a reduction of €70 per year does not significantly reduce the overall burden. Regional differences are particularly problematic: while Saxony will see savings of around 8.5% on electricity costs, Bavaria will benefit only minimally, with savings of just 0.8%. These disparities are a consequence of the different grid costs in the federal states. Another risk is that energy suppliers are not required to pass on these subsidies in full to customers.
Commuter allowance becomes a flat rate
One of the few clearly positive changes is the adjustment of the commuter allowance, which will be increased to 38 cents per kilometer from January 1, 2026—and for the first time from the very first kilometer rather than only from 21 kilometers. The previous two-tier system (30 cents for 1–20 km, 38 cents from 21 km) was often criticized as unfair because it systematically disadvantaged short-distance commuters.
An employee with a daily commute of 10 kilometers now benefits from an additional tax relief of around 83 euros per year for 1,040 kilometers per year – for 20 kilometers, the benefit rises to 190 euros per year. For people who live in rural areas and have to commute to the city every day, this can mean a noticeable reduction in costs, especially as travel expenses are already under pressure due to increased gasoline prices.
Sales tax on food and beverages decreases
One of the few straightforward pieces of positive news is the reduction in sales tax on food in restaurants from 19% to 7% as of January 1, 2026—and this regulation is expressly intended to be permanent. Beverages will continue to be taxed at 19%, continuing the familiar distinction between food and beverages.
Restaurants can now lower their prices or increase their profit margins – but it is questionable whether these tax savings will be passed on to consumers. At least McDonald’s has adjusted and reduced some of its prices.
Payment for order flow is history
A new era will begin for ETF and stock savers on June 30, 2026, when payment for order flow (PFOF) is banned in the European Union. PFOF is a business model in which neobrokers such as Scalable Capital* or Trade Republic* pass on their customer orders to certain stock exchanges and receive rebates in return – an arrangement that has made it possible to trade completely free of charge.
After June 2026, this practice will be prohibited, which is why brokers will have to fundamentally adjust their business models. Initial reactions are already apparent: Scalable Capital, for example, has established its own trading platform called European Investor Exchange (EIX) in order to continue its business activities independently of the PFOF ban. Other large brokers are likely to introduce fee models.
This is a critical turning point for small investors: supposedly “free” trading was never actually free, but the costs were hidden in the spreads and in the choice of trading venues. After the PFOF ban, these costs will become more transparent, but possibly also higher. This could lead to significant additional costs, especially for savings plans with many small orders.
Conclusion: 2026 will be a year of consolidation
The changes for 2026 follow a clear pattern: the state will earn more through higher CO₂ prices and moderate tax increases, while social security contributions will come under further pressure. At the same time, pension increases will be more moderate, which means that the gap between income and living costs will continue to widen.
The conclusion remains the same as in previous years: personal responsibility is the order of the day. Anyone who wants to get ahead financially in 2026 will have to take action themselves – through savings rates, diversified investments, risk diversification, and a clear strategy that works independently of government redistribution decisions.
Bitcoin, ETFs, dividend stocks, and traditional savings plans remain proven tools for building wealth and protecting against inflation.
