The clock is reset to zero every year when the tax laws change. There are also likely to be a number of changes at the turn of the year.
Most of the changes will probably come with the Growth Opportunities Act. However, this was stopped at the last minute by the Bundesrat and sent to the mediation committee. Thus, everything is still open, which precludes a reliable prognosis. However, changes have also been made outside of the package that need to be taken into account. Therefore, we want to pick out some changes and compare them.
Planned changes to tax-free allowances and deductions
The Growth Opportunities Act is intended to change several tax-free limits and allowances. For example, a tax-free limit for rental income is to be introduced. Rental income of up to €1,000 per year is to remain tax-free from 2024. In addition, the exemption limit for private capital gains on sales is to be raised from €600 to €1,000 per taxpayer. An exemption limit means that if it is exceeded, the full amount is taxable. In contrast, only the excess amount is taxed in the case of tax-free allowances. There are also plans to change these. For example, the tax-free allowance for company events will be increased from €110 per event and participating employee in 2024 to €150.
Planned changes in the area of depreciation
There will also be some changes in the area of depreciation. A new standard depreciation for residential buildings constructed after December 31, 2022 in the amount of 3% of the acquisition costs has already been introduced for the 2023 assessment period. In addition, the Growth Opportunities Act will allow a declining balance depreciation of 6% per year to be applied for residential properties purchased or for which construction is started between October 1, 2023 and September 30, 2029. In addition, the regulation for special depreciation, which was changed last year, is to be extended to improve the construction of new rental housing. The deadline for building applications for new, not yet existing apartments is to be postponed to December 31, 2029. Due to price increases, the limit for acquisition costs is to be increased to €5,200 per square meter and the assessment basis to €4,000 per square meter.
In addition, there are to be changes to the rules for movable assets. The limit for the immediate write-off of low-value assets is to be raised from €800 to €1,000. The limit for compound items will rise from €1,000 in total to €5,000, while the depreciation period will be reduced from five years to three years. This applies to acquisitions from 2024. In addition, the declining-balance depreciation for movable assets acquired or manufactured after September 30, 2023 and before January 1, 2025 is to be reintroduced.
There is also a glimmer of hope for small and medium-sized companies. The special depreciation allowances for their capital expenditures are to increase from 20% to 50% of the expenditures for assets acquired from 2024 onwards.
In order to make energy-efficient renovations more attractive, the tax deductibility of the associated expenses is to be expanded. For measures that were started after December 31, 2023 and completed before January 1, 2026, 10% of the expenses can be deducted in each of the first three years, with the deduction in the first year being limited to a maximum of €14,000 and in the following two years to a maximum of €12,000. The deduction can be made immediately from the tax and is therefore particularly attractive.
Further incentives for switching to e-mobility
Those who want to purchase an electric company car in 2024 will be rewarded. In order to further boost sales, there are plans to make it easier to determine the value of private use for e-cars purchased after December 31, 2023. The applicable privilege limit based on the acquisition costs is to increase to €70,000. In addition, the minimum range of the electric drive for hybrid vehicles will be eliminated for cars purchased after December 31, 2024.
Amendments to thresholds for value added tax and the like
In addition, the Growth Opportunities Act provides for a postponement of several thresholds for value added tax and accounting requirements. It should be possible to pay tax on collected revenues, i.e. on receipt, up to an annual turnover of €800,000 from 2024. At the same time, the value limit for the accounting obligation is to be adjusted. So-called small companies are also to be exempted from the tax declaration obligation, although there will be exceptions here too, such as for vehicle suppliers.
Extension of loss deduction
In addition, improvements to the loss deduction for the period 2024 to 2026 are on the cards. The loss carryback, which has already been extended to two years, is to be increased to three years and the limit to €10 million per tax liability. For loss carryforwards, the deduction in excess of the base amount is to be possible in the years 2024 to 2027 in the amount of 75% of the total amount of income in the carryforward year.
These changes have already been secured
Some changes have already been ensured by being moved to other laws. This concerns the adjustments of the tax laws to the law for the modernization of the law on business partnerships. For example, business partnerships can now choose whether they want to switch to corporate taxation. However, what is likely to be more relevant for the average citizen is that the legislator has waived the taxation of the December 2022 relief.
Note the change in the deduction for the home office for 2023
The change in the deductibility of costs for a home office is to be taken into account as early as the 2023 tax return. From 2023, expenses for a home office can only be deducted if it is the main place of work. Either the actual expenses or a flat rate of €1,260 can be deducted. If the home office is not the center of work, only a deduction is possible via the home office flat rate introduced in the context of the corona pandemic, in the amount of €6 per day, but not exceeding €1,260 per year. However, this applies regardless of whether a workplace is available in the company.
So there will still be a lot to consider in 2024. Whether all the changes will come into effect as proposed will depend on further negotiations between the Bundesrat and the Bundestag. The result will be known in the coming weeks and days.
The statements represent initial information that was current for the law applicable in Germany at the time of initial publication. The legal situation may have changed since then. Furthermore, the information provided cannot replace individual advice on a specific matter. Please contact us for this purpose.