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’Standard’ income events in connection with children
1-3.
The couple has 1, 2 or 3 children
In Germany there is a tax credit (refundable) for each child, or a tax deduction (de-
duction in taxable income).
For the 1st child (6 years old) the tax credit is 2,640 DEM and the deduction in
taxable income is 6,912 DEM (for each child). The family gets what is most advan-
tageous.
Taxes for the couple without children are 14,426 DEM (before sol. tax). For the
couple with one child they are 12,350 DEM (before sol. tax) when the deduction is
applied. The difference is 2,076 DEM, which is less than the tax credit.
The increase in disposable income compared to the situation without children, where
the disposable income is 53,579 DEM, is 2,640 + 156 = 2,796 DEM (156 is a reduc-
tion in the sol.tax) or 5.2 per cent, when there is 1 child (6 years old).
For the 2nd child (3 years old) the tax credit is also 2,640 DEM.
Taxes for the couple without children are 14,426 DEM (before sol.tax). For the
couple with two children they are 10,314 (before sol. tax) when the deduction is
applied. The difference is 4,112 DEM, which is less than the tax credit of 5,280
DEM.
The increase in disposable income compared to the situation without children, where
the disposable income is 53,579 DEM, is 5,280 + 308 = 5,588 DEM (308 is a reduc-
tion in the sol. tax) or 10.4 per cent, when there are 2 children (6 and 3 years old).

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For the 3rd child (1 year old) the tax credit is 3,600 DEM.
Taxes for the couple without children are 14,426 DEM (before sol. tax). For the
couple with three children they are 8,320 (before sol. tax) when the deduction is
applied. The difference is 6,106 DEM, which is less than the tax credit of 8,880
DEM.
The increase in disposable income compared to the situation with no children, where
the disposable income is 53,579 DEM, is 8,880 + 458 = 9,338 DEM (458 is a reduc-
tion in the sol. tax) or 17.4 per cent, when there are 3 children (6, 3 and 1 year old).