Welcome to 2021: less solidarity tax, more tax on pollution
This article was first published in Hebrew on SpitzMag.
Go us! We made it through 2020! Same as every other year, 2021 holds some administrative changes which are relevant for all of us. Here are the main ones:
Most of the population will not pay solidarity tax anymore.
Let's start with a short history lesson: Solidarity tax is an addition of 5,5% to the income tax, which was implemented into Germany's taxation system back in 1991 to rehabilitate east Germany. During the past 3 decades, it was used for various social purposes in Germany.
During the past years, there were many discussions about abolishing the solidarity tax, and every time - it didn't happen. It will happen now, in 2021, but only partially, for 90% of the population: from now on, only people whose yearly income is higher than 61.717 Euro will continue paying solidarity tax. The rest could enjoy a higher nets income.
The income-tax-free income will increase.
The yearly income tax-free income will increase from 9.408 Euro to 9.696 Euro for people who file their taxes independently. Married couples who file their taxes together will enjoy double than that, meaning 19.392 Euro.
The VAT percentage will increase back.
In July 2020, the VAT percentage temporarily decreased from 19% to 16% for services and products and 7% to 5% for non-luxury products. Many merchants and service providers gave this reduction to their customers to encourage consumption. This reduction, which was meant to break the corona-crisis induced recession, was meant to stay with us only until the end of 2020.
Starting in January 2021, the VAT percentage will increase back to the standard, known percentage: 19% for services and products and 7% for non-luxury products.
Minimum-Wage will increase
The minimum wage will also increase in January 2021 to 9,50 Euro per hour. In the coming 2 years, the minimum wage will increase twice a year: In July 2021, the minimum wage will rise again, to 9,60 Euro per hour.
Children's benefits will increase.
Families who receive children benefits (Kindergeld) could enjoy higher payments: the benefits will increase by 15 Euro per month: for the first and second child, families will receive an amount of 219 Euro per month. For the third child, an amount of 225 Euro per month will be paid, and starting the fourth child - families may expect an amount of 250 Euro per month.
The Blue Card salary threshold will increase.
Same as every year, also this year - the Blue Card salary threshold will increase: Professionals from shortage professions (for example, software developers or doctors) will be required to earn a salary higher than 44.304 Euro p.a. to be eligible for a Blue Card. All other professionals (e.g., marketing professionals, executives, or operation managers) will have to present a yearly salary of 56.800 Euro or more.
It will be easier to change public health insurance providers.
Until now, changing your public insurance provider (Krankenkasse) or changing insurance from public to private was only made possible after an insurance period of min. 18 months. Starting in January 2021, the waiting period will be shortened to 12 months.
Additionally, employees will have the possibility of changing their health insurance provider (Krankenkasse) every time they start a new job. The new health insurance provider will take care of the admin-tasks of switching.
Moreover, in January 2021, public health insurance providers could increase one insurance-part (in German: Zusatzbeitrag) by 0,2 points to 1,3%. If your health insurance provider chose to do so, you would enjoy the option of changing providers immediately.
Ecological taxes and a prohibition on one-time-use products made of plastic
As part of Europe's environmental acts, the costs of fuels and oil sued for heating and driving will increase according to the pollution they create. The goal of this action is to encourage the use of sustainable energy.
Additionally, the tax on purchasing new cars will increase, and starting July 3rd, 2021, the EU will prohibit selling one-time use products made of plastic.