Millions of citizens can look forward to from 2021: The solos on income tax will no longer apply to most people. But who benefits particularly from it? A calculation provides information about this.
New tax rules apply in Germany: The solidarity surcharge, or solos for short, will no longer apply to most people. 90 percent of all income taxpayers will no longer pay the additional tax, which was first introduced in 1991, from January onwards. For another 6.5 percent of the payers, the following applies: The solos will be reduced in steps from 5.5 percent to 3.5 percent.
In addition to the elimination of the solidarity surcharge, the basic tax allowances will increase. Single people will only pay taxes on an annual income of more than 9,744 euros in 2021 – in 2020 the limit was 9,408 euros. For jointly assessed spouses, double the amount of 18,816 euros applies.
For millions of people in Germany, these changes automatically mean a higher net income. Those who invest the money can even come to a fortune of 50,000 euros – without having to forego a single cent, as a calculation by digital asset manager Growney for t-online shows.
But how can that be achieved? And who will benefit in particular from the partial abolition of the solos? The effects can be clearly seen using three examples.
Single employees with gross monthly earnings of EUR 4,000 will have in 2021 51.96 euros more net wages in the bag.
This sum is calculated as follows: So far, the solos is 37.21 euros – 5.5 percent of the monthly wage tax of 676.58 euros. From January it will no longer exist. In addition, the basic tax allowance increases. This results in a monthly wage tax of EUR 661.83 in 2021.
The difference between the tax burden in 2021 and the tax payment in 2020 is therefore: 676.58 euros – 661.83 euros = 14.75 euros. Together with the elimination of the solidarity surcharge of 37.21 euros, this results in a net plus of 51.96 euros.
The savings become even clearer with a higher gross wage, as the following table shows:
The Growney company, which as an asset manager has an interest in more investors, does the math: If you invest the monthly saved solos of 51.96 euros with a gross wage of 4,000 euros, you can build on a small fortune in the long term.
Around 50,000 euros are in there if you have the money 27 years and eight months with an assumed annual yield, called yield, of 6.7 percent. A realistic assumption, as Thimm Blickensdorf von Growney explains: “Historical data shows that a very attractive return can be achieved with a global portfolio.” This is possible with a broad investment in so-called Index funds or ETFsthat replicate an entire stock index like the Dax and are considered to be relatively low-risk.
Family with two children
A couple with two children and a joint monthly gross earnings of 8,000 euros will have next year 80.5 euros more net wages in the bag.
It works like this: In 2020, the parents paid wage tax of 1,353.16 euros every month. In 2021 this amount will decrease to 1,323.66 euros, so the wage tax difference between 2020 and 2021 will be 29.5 euros. The elimination of the solidarity surcharge of 51 euros per month and the lower wage tax results in the monthly net bonus of 80.5 euros.
Danger: The rising child benefit is not taken into account in this calculation. The increase in child benefit from 2021 results in a net bonus of 110.5 euros.
The savings become even higher when the income is higher. This is shown in the following table:
If the parents now invest the money they have saved with a gross monthly wage of 8,000 euros, they can do it 22 years and 5 months achieve a fortune of 50,000 euros. The prerequisite for this is again an annual return of 6.7 percent (see above).
A retired couple who retired in 2020 at the age of 65 and who have a gross monthly income of EUR 3,500 will have a month from 2021 17.68 euros more in the bag.
It works like this: The couple will pay a total of 248.67 euros in income tax in 2020, and the tax burden will be 244.67 euros in 2021. The difference is therefore 4 euros. The elimination of the solos saves the couple 13.68 euros a month. So you get the total net plus of 17.68 euros.
Here, too, the following applies: the higher the monthly income, the more likely pensioners will benefit from the elimination of the solidarity surcharge.
Who will benefit from the elimination of solos – and who will not?
As the calculations show, people with a higher income benefit more from the elimination of the solos and the increasing basic allowances than people who earn less. There are two exceptions to this rule.
First: Low wage earners. You do not benefit at all from the omission of solos. Because so far they have not paid any solidarity surcharge anyway, so they do not benefit from the changes. This applies to singles with a gross monthly salary of up to around 1,600 euros or for single parents (1 child) up to around 2,400 euros. For married couples, the limit is a joint monthly gross of 3,200 euros (childless) or 4,800 euros (2 children).
Secondly: Top earners. Anyone who, as a single, has gross earnings of more than around 9,300 euros per month must continue to pay the full solidarity surcharge of 5.5 percent in the future. For couples, the limit is a joint gross salary of 18,250 euros per month.
In addition, the following applies: The solos do not apply to investment income above the saver lump sum of 801 euros. Even companies that pay the so-called corporate tax of 15 percent must continue to pay the full solos on it.
About the method: The examples given are only model calculations – the actual tax burden and savings can therefore turn out differently. For the calculation of income tax, Growney, like a pay slip, did not include advertising costs, any special expenses or pension contributions. Growney also did not take into account any special payments, bonuses or Christmas bonuses. In the examples, only allowances for children or, in the case of pensioners, the lump-sum allowances automatically set by the tax office are factored in.