Definition and legal foundations of the childcare allowance
Der Childcare allowance is a term under tax law and refers to a special tax-exempt amount in income tax granted to parents for the care, upbringing, or education of children. The legal basis for the childcare allowance is found in Section 32 (6) of the German Income Tax Act (EStG). Together with the child allowance, the childcare allowance is intended to ensure that the subsistence level of children, as well as additional needs for care, upbringing, and education, are exempt from taxation.
Purpose and function of the childcare allowance
Tax relief
The childcare allowance serves to relieve parents or other persons required to provide maintenance by allowing a fixed amount to be deducted from taxable income. The aim is to mitigate the additional financial burdens associated with the care, upbringing, and education of children.
Constitutional background
From a constitutional perspective, the childcare allowance derives from the tax-exempt subsistence minimum, which has been consistently protected by the Federal Constitutional Court. The subsistence minimum includes not only basic needs but also a child’s needs for care and upbringing and should not be subject to taxation.
Eligibility requirements and entitled persons
Eligible persons
Entitlement to the childcare allowance typically arises for biological parents, adoptive parents, and foster parents of a minor child residing in Germany. If several people are responsible for the same child, the allowance is generally divided equally, provided both contribute to the child’s maintenance.
Joint and separate assessment
For jointly assessed parents, the childcare allowance is granted to each parent in equal halves. For separated parents, each is entitled to half of the allowance, provided both participate in the child’s care. A transfer of the childcare allowance to one parent is possible under certain conditions, in particular if the other parent does not meet their maintenance obligation or is not involved in providing care.
Amount and calculation of the childcare allowance
Statutorily determined amount
The childcare allowance is regulated by law and amounts to 2,928 euros per child per year (as of 2024). This amount is divided equally between both parents if no transfer to one parent takes place.
Relation to the child allowance
In addition to the childcare allowance, there is the child allowance (§ 32(6) EStG) for the material subsistence minimum. Both allowances are considered together and compared with the entitlement to child benefit as part of the more-favorable assessment (Günstigerprüfung). The tax office automatically sets off the claim to child benefit for each relevant child in the income tax assessment and applies the more favorable option for tax purposes.
Transfer and special provisions
Transfer of the allowance
The childcare allowance may, under certain circumstances, be fully transferred to one parent if the other parent does not provide care or maintenance. The application for transfer must be submitted to the tax office. The other parent can object if they can prove a minimum level of care or maintenance payments.
Special cases
In cases of patchwork families, foster children, or adult children still in education, there may be different rules regarding eligibility and transferability. Allowances are generally only granted for children whose primary residence is in Germany.
Distinction from other tax advantages
Difference from actual childcare costs
The childcare allowance should not be confused with the tax-deductibility of actual childcare costs (e.g., for daycare facilities). While the allowance is granted as a lump sum, actual childcare costs (under specific requirements and maximum limits) can also be claimed as special expenses.
Relationship to child benefit and child allowance
The so-called more-favorable principle ensures that either the tax savings from the child and childcare allowance or the child benefit paid results in the most advantageous relief. If a greater relief is achieved through the allowances, the difference is granted retrospectively as part of the tax assessment.
Legal development and case law
Historical development
The childcare allowance was first introduced in 2000 and has been adjusted several times. This responds to constitutional requirements that demand adequate tax exemption of the child’s subsistence minimum. Regular adjustments are based on the development of the subsistence minimum in accordance with legislative provisions.
Decision by the Federal Constitutional Court
The Federal Constitutional Court has confirmed several times that, in addition to the child allowance, expenses for care and upbringing must also be exempted in order to meet the requirements for the tax-free subsistence minimum and the principle of equal treatment.
Practical implementation in tax assessment procedures
Consideration in the tax assessment
The application of the childcare allowance is usually automatic in the income tax assessment. The prerequisite is that the child is listed in the assessment with the corresponding information. A separate application is only necessary for transfer cases.
Proof and clarification of entitlement
The tax office checks, based on registration data and child benefit notifications, whether the requirements for the childcare allowance are met. In case of uncertainty, additional evidence regarding the care and maintenance situation may be requested.
References and further legal provisions
- Income Tax Act (EStG), in particular Section 32 (6) EStG
- Rulings of the Federal Constitutional Court on tax relief for parents
- Information from the Federal Ministry of Finance on the child allowance and childcare allowance
Summary
The childcare allowance is a central instrument for the tax relief of families and helps ensure that expenses for the care, upbringing, and education of children are taken into account in tax law. Its structure, eligibility requirements, and regular adjustment are determined by legislators and case law and aim to appropriately exempt the subsistence minimum of children from taxation. The childcare allowance is therefore a key element of family tax law in Germany.
Frequently asked questions
Who is eligible for the childcare allowance?
The childcare allowance is, according to Section 32 (6) sentence 1 EStG, generally available to the biological parents of a child who is a minor and for whom they are entitled to child benefit or the child allowance. If parents are separated or divorced and do not care for the child jointly, entitlement to the childcare allowance can be divided between the parents or entirely transferred to one parent (Section 32 (6), sentences 6 and 7 EStG). The parent with whom the child is registered for their main residence and who provides the majority of care has a primary claim to the allowance. In special cases, step-parents or foster parents may also be eligible, provided they meet the legal requirements and provide actual care.
How is the childcare allowance divided for separated parents?
For separated parents, each is entitled to half of the childcare allowance. However, one parent may apply to the tax office to have the entire allowance transferred to them if the child is cared for exclusively or predominantly by that parent (Section 32 (6) sentence 6 EStG). The other parent may object to the transfer if they claim to regularly provide considerable care themselves. Such an objection must be substantiated to the tax office. For example, if the child regularly visits the other parent’s home, stays overnight there regularly, or is significantly provided for by the other parent, this may constitute a “considerable extent.”
What proof does the tax office require for the transfer of the childcare allowance?
The tax office usually requires specific evidence or at least credible information about the extent to which actual care is provided by the applying parent. This especially includes registration information (the child’s registration with one parent), possibly custody documentation, as well as documented periods during which the child stays with the other parent (“access arrangements”). Convincing evidence may also include care schedules, witness statements, or agreements between the parents confirming the scope of care.
Under what conditions may the other parent object to the transfer?
In principle, the allowance can only be fully transferred to one parent if the other parent neither provides care for the child nor pays maintenance. According to the Federal Fiscal Court (BFH), “personal care to a not insignificant extent” is sufficient for the parent to prevent the transfer. “Not insignificant” is understood to mean regularly provided care that goes beyond mere visiting contacts. A typical example is the alternating residence model with care shared almost equally. Occasional weekends or holiday stays may also suffice if they make a meaningful contribution to the child’s upbringing and care.
Does the childcare allowance affect support/maintenance calculations?
The childcare allowance only affects the parents’ taxable income and has no direct impact on civil law maintenance calculations. It does not reduce maintenance payments and is available for tax purposes alongside the child benefit or child allowance. However, the granting of the childcare allowance may be indirectly relevant to the determination of financial capacity in court proceedings if courts consider the tax situation and gains.
Can the childcare allowance be claimed by foster parents or grandparents?
Lawmakers generally allow the childcare allowance to be claimed by foster parents and, under certain circumstances, by other persons if they care for a foster child within the meaning of Section 32 (1) No. 2 EStG or even grandchildren for whom they receive child benefit. The same requirements for actual care apply here. It is important that they are entitled to child benefit for the child and assume primary care. Double claims by biological parents and foster carers are excluded.
How does the childcare allowance affect the tax class?
The childcare allowance has no direct impact on the tax class, but is considered within the income tax return as part of the child allowance. The choice of tax class remains unaffected; however, the allowance can be entered on the income tax card, resulting in reduced wage tax liability during the calendar year. The final tax relief is always determined in the income tax assessment, regardless of tax class.
