New Year, New Laws What’s Changing in 2026

Child benefits will increase by 4 euros to 259 euros per month per child. The child tax exemption will also be raised—to 6,828 euros. Together with the childcare, education, and training tax exemption, this results in a total tax exemption of 9,756 euros.  

The basic income tax exemption is rising from 12,096 to 12,348 euros per person. For joint tax returns, the amounts are doubled for spouses or domestic partners.

In statutory health and pension insurance, the contribution assessment ceilings are being raised. In health insurance, the ceiling will be 69,750 euros per year (5,812.50 euros per month); the same amount applies to long-term care insurance. The new threshold for mandatory insurance coverage is 77,400 euros per year (6,450 euros per month). For pension insurance, the threshold rises to 8,450 euros per month.

Starting January 1, 2026, the commuter allowance will be simplified: A flat rate of 38 cents will be paid for every kilometer driven, starting right from the first kilometer. The previous tiered rate (30 cents up to 20 kilometers, then 38 cents) will be eliminated. Commuters with shorter or medium-length commutes are likely to benefit from this in particular. As before, the tax return will reflect the one-way trip from home to the primary workplace, not the round trip.

Starting in January 2026, passengers will have to pay more for the Deutschlandticket: The pass, which launched as a 49-euro ticket, will increase from 58 to 63 euros. This is due to higher operating costs in local public transportation and the growing financial burden on the states.

Germany must transpose the European Union’s Pay Transparency Directive into national law by June 7, 2026, at the latest. The legislative process is currently underway. The directive provides employees with better rights to information about compensation structures in the future. Employers must specify the starting salary or a salary range as early as the application process and actively implement the principle of “equal pay for equal and equivalent work.” They are required to check for gender-based pay gaps and take action in cases of discrimination. This will replace the previously ineffective Pay Transparency Act with a binding regulation—ensuring greater rights and improved transparency in compensation.

Starting January 1, 2026, employees receiving an active pension will be able to earn up to 2,000 euros per month tax-free without having their statutory pension reduced. This provision applies regardless of whether the pension is already being paid or the start of pension payments has been deferred.

In July 2026, there will be an increase in the old-age pension. According to current model calculations in the Pension Insurance Report, the increase is expected to be 3.73 percent. However, the exact figure will not be determined until spring. Starting in 2026, the limits on additional earnings will rise for those with full and partial work capacity reductions.

The following applies to all severely disabled individuals born on or after January 1, 1964: A pension without any reduction will not be paid until age 65. Those who wish to retire earlier can still do so starting at age 62, as before, but must accept a reduction of up to 10.8 percent. There are no longer any transitional provisions or protection of legitimate expectations for older age groups.

Anyone with a driver’s license issued between 1999 and 2001 must exchange it for the modern credit-card-sized version by January 19, 2026. Anyone still driving with the old license after that date faces a fine of around 10 euros. The new EU driver’s license is valid for 15 years and costs about 25 euros.

The VAT rate for food (not beverages) in restaurants is dropping from 19 to 7 percent. This change is no longer temporary but permanent, which should please both restaurant owners and diners.

The right of withdrawal for online contracts is being simplified. Online purchases can be canceled with the click of a button. This provides consumers with greater protection and security when shopping online. 

Users of online content often wonder whether texts and images were created using AI. Starting August 2, providers and operators of artificial intelligence must label AI-generated content within the EU.

The right to repair promotes greater sustainability. Manufacturers must ensure that certain products are repairable and must keep replacement parts in stock. The corresponding EU regulation must be transposed into German law by July 2026.

Car insurance rating classes are being reorganized. About six million vehicles—primarily SUVs and more expensive models—will be placed in higher classes and will therefore become more expensive. In contrast, about 4.5 million drivers can look forward to lower rates, especially owners of smaller or more compact cars. In addition, the regional classes for liability, partial coverage, and comprehensive insurance will be recalculated. As a result, around ten million policyholders will receive new classifications. Depending on the region, this may result in lower or higher premiums.

Starting in 2026, the second phase of the Euro 6e emissions standard will apply to all newly registered passenger cars; this standard is stricter than the previous Euro 6 version. The standard is designed to more accurately measure ultrafine particles from gasoline engines.

Starting in 2026, the legal right to full-day care in elementary schools will be introduced starting in first grade.

Tax assessment notices will be provided digitally starting in 2026. As soon as the tax office has processed the tax return, the notice will be uploaded as a PDF file to the user’s personal ELSTER inbox. The document can be accessed directly via “My ELSTER.” The one-month appeal period begins four days after the notice is made available. If the inbox is checked only rarely, there is a risk of missing deadlines. Therefore, it is recommended to enable email notifications and check the inbox regularly. Those who still prefer paper copies must opt out under “Consent to Electronic Notification” in the ELSTER portal. People without internet access can invoke the hardship provision.