Ask a tax advisor on the topic of Other questions to tax advisors

Tax assessment credit child allowance vs. child benefit

June 12, 2013 | 35,00 EUR | answered by Michael Herrmann

Due to a changed decision by the local tax office, the income for 2008 has increased retroactively. The tax assessment for 2008 was reissued by the tax office, this time including the child allowance, which was not included before. As a result, the child benefit has to be repaid.

However, it seems that the tax office's computer is making a calculation error, as the recalculation including the child allowance is significantly less favorable than the calculation without the child allowance. This is because capital gains were also generated, which were previously taxed by the tax office at 0 euros. The increased income raises the taxable amount according to the splitting table, but the taxes to be paid on it are much lower than the child benefit paid, see below.

Married, 1 child, (14,043 from capital gains)
-------
Current tax assessment from the tax office, including the child allowance:

Income: 29,765
minus child allowance: 5,808
taxable income: 23,957

taxable according to splitting table: 9,914; Tax 0
according to § 34 para. 1 EStG: 14,043; Tax 0
remain: 0
plus child benefit: 1,848
income tax to be assessed: 1,848
-------

My calculation without the child allowance:

Income: 29,765
(of which 14,043 from capital gains)
plus child benefit: 1,848
taxable income: 31,613

taxable according to splitting table: 17,570; Tax 358
according to § 34 para. 1 EStG: 14,043; Tax 0
remain: 358
income tax to be assessed: 358
-------
Is my calculation without the child allowance correct?

Michael Herrmann

Dear inquirer,

first of all, thank you very much for your inquiry, which I would like to answer based on the information you provided and in the context of your commitment as part of an initial consultation. The response is based on the description of the situation. Missing or incorrect information regarding the actual circumstances can affect the legal outcome.

Based on the information provided, your assumption is correct. Even without going into detailed calculations, the inclusion of the child allowance is unfavorable and therefore unlawful. There is an error in your calculation in that child benefit should not be counted as income. The tax burden is therefore slightly lower.

The inclusion of the child allowance only leads to a more favorable result starting from a marginal tax rate of 31.8%. This is only the case when applying the splitting tariff with a taxable income of around €60,000. Since your income is significantly lower, detailed calculations are unnecessary.

You should immediately object to the amended tax assessment. Based solely on the income situation, the inclusion of the child allowance is not correct.

I hope that these explanations within the scope of your commitment and this initial consultation have provided you with a sufficient overview of the situation and remain

Yours sincerely,

Michael Herrmann
Graduate in Financial Management (FH)
Tax advisor