The state relieves parents of the financial burden of raising children by paying them child benefit or granting them tax allowances.
As part of the income tax return, the tax office checks ex officio which is more favorable for the person concerned in the respective case in the previous calendar year. For this purpose, a comparative calculation is carried out between child benefit and tax-free child allowance or tax-free allowance for care and education or training needs.
Only child benefit is paid in the current calendar year. The child allowance and the allowance for care and education or training needs are not taken into account when calculating income tax, with one exception (creation of an allowance by the tax office if there is no entitlement to child benefit for the child).
However, the allowances for children affect the amount of the solidarity surcharge and church tax, which is why the number of child allowances is still important when creating 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, church tax characteristics and, if applicable, the amount of monthly contributions
for private health insurance and compulsory private long-term care insurance are stored by the tax authorities for all employees in a central database. Based on this data, the tax authorities provide employers with the income tax deduction details 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 favor, 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.