Tax Exemption of Child Benefits
Child benefits are exempt from tax according to the Income Tax Act (§ 3 No. 24 EStG). This means that they are not subject to income tax and do not need to be reported as taxable income in the tax return. This tax exemption applies regardless of the amount of the child’s vocational training compensation (Ausbildungsvergütung).
Benefit Assessment by the Tax Office
Although child benefits are tax-free, they are considered during the parents’ income tax assessment. The tax office automatically conducts a so-called benefit assessment to check whether the child benefits or the child tax allowance is financially more advantageous for the parents. The following applies:
- If the child benefits turn out to be more advantageous, the current payment of child benefits will remain unchanged.
- If the tax child allowance is more favorable, it will be considered during the calculation of income tax. In this case, the paid child benefits are retained but are offset against the tax advantage.
Child Benefits and Child Tax Allowance
The child tax allowance serves to exempt the child’s subsistence minimum from taxes. In 2025, the child tax allowance amounts to a total of €8,712 per year and child, including the allowance for care and education needs. Parents receive either the tax advantage of the child tax allowance or the child benefits – depending on which is more advantageous.
No Impact on Other Tax Benefits
Child benefits do not affect other tax benefits such as the vocational training allowance or the relief amount for single parents. These benefits can be claimed additionally if the respective requirements are met.
Child Benefits and the Trainee’s Deductible Expenses
Child benefits are not deducted from the trainee’s deductible expenses. This means that the trainee can fully claim their expenses related to vocational training (Ausbildung) – such as travel costs, specialist literature, or work materials – for tax purposes without the received child benefits reducing these tax advantages.
Important Notes on the Tax Treatment of Child Benefits
Parents should note that although child benefits are not considered income for tax purposes, they are included in the benefit assessment. Therefore, it may be sensible to check the tax implications of the child tax allowance at higher income levels. The tax treatment of child benefits remains unaffected by whether they are paid directly to the parents or the trainee.