The state relieves parents of the financial burden of raising children by paying them child benefit or granting them tax allowances.
Within the framework of the income tax return, the tax office examines ex officio what is more favourable for the person concerned in the respective case in the past calendar year. For this purpose, a comparative calculation is carried out between child benefit and the tax allowance for children or the allowance for care and education or training needs.
In the current calendar year, only child benefit is paid. The child allowance and the tax-free allowance for care and upbringing or training requirements are not taken into account when calculating income tax, with one exception (creation of a tax-free allowance by the tax office if there is no child benefit entitlement for the child).
However, the allowances for children affect the amount of the solidarity surcharge and the church tax, which is why the number of child allowances is still important when forming the ELStAM. Only then can your employer calculate these deductions correctly.
Note
The characteristics relevant for the wage tax deduction procedure, such as tax class, factor if applicable, number of child allowances, other allowances, but also the church tax characteristic are stored by the tax authorities for all employees in a central database. On the basis of this data, the tax authorities make the wage tax deduction characteristics available to employers for electronic retrieval. Further information on this can be found at "My Elster".
Children resident in Germany are taken into account continuously until the end of the calendar year in which they reach the age of 18. If the number of child allowances changes in your favour, e.g. when a child is born, this is regularly taken into account by the tax authorities as ELStAM on the basis of the notification from the municipality.