In a bid to cushion the population from rising energy prices, the German federal government has unveiled a new relief package. Taxpayers are to be relieved in 2022 with higher allowances, saving them money on their taxes, while low-income people and companies will also benefit from state aid. 

German government agrees on tax relief to offset high energy prices

Rising consumer prices - particularly for energy - are hitting many people in Germany hard. The coalition government has therefore earmarked more than 15 billion euros for a far-reaching tax relief package. 

As well as help with utility bills, and a one-off payment for those drawing basic benefits like unemployment benefits, the package includes significant tax breaks for people working in Germany. The tax relief will be implemented retrospectively from January 1, 2022 in the Tax Relief Act 2022.

Namely, the act includes the following amendments:

• The employee lump sum allowance (which can be deducted from one’s taxable income in the annual tax return) has been increased by 200 euros to 1.200 euros per year. 
• The basic allowance for income tax (below which no tax is due) has been increased by 363 euros to 10.347 euros. 
• The distance allowance for long-distance commuters (those who travel 21 kilometres or more to work on any form of transport) has been increased from 35 to 38 cents per kilometre until 2026. 

As previously announced, the cabinet has also decided to extend the home-office flat rate allowance into 2022, as well as extending the filing deadlines for tax returns for 2020, 2021 and 2022. Further relief will also be provided when the EEG surcharge is scrapped on July 1, 2022. 

One-off heating allowance to be doubled

In the same sitting, the cabinet also agreed to provide low-income households with extra support - namely by doubling the planned one-off heating allowance. Recipients of housing benefits in Germany should now receive a subsidy of 270 euros for their heating costs, instead of 135 euros. Two-person households will get 350 euros and people studying in Germany in receipt of a student loan will receive 230 euros. 

“We know that low-income households in particular are suffering from rising energy prices,” said SPD group leader Verena Hubertz. Of the original 135-euro payment, she said: “Against the background of price developments for energy and heat, this was no longer tenable.” She added that further relief steps would have to follow for households not entitled to housing benefits and businesses struggling with high utility bills. 

Low-income families to receive extra support

Low-income families will also be relieved of rising costs, with the government agreeing to pay out an additional 20 euros per month from July for children affected by poverty. People receiving unemployment benefit II (Hartz IV) or basic security will also receive a one-off coronavirus subsidy of 100 euros to help with extra expenses like the purchase of face masks. 

“It is clear that the welfare state will continue to support people in difficult times,” said Labour Minister Hubertus Heil, announcing the relief package, to the dpa.