Tax outlines Budget Day: citizens

The government adjusts several taxes for citizens every year. The measures are contained in the Tax Plan 2025. The House of Representatives and the Senate still need to approve the plans. What are the most important measures for citizens?

Adjustments to income tax brackets and general tax credit (AHK)
From 1 January 2025, the government plans to adjust income tax rates and tax brackets, reduce the general tax credit (AHK) and link the cut-off point to the minimum wage. The new tax measures will ensure that middle-income earners in particular will have more to spend.

When the AHK goes down, people do pay slightly more tax and contributions on their income. The government also wants to support people with low incomes. This is done, for instance, with a higher rent allowance and more child-related budget.

The government proposes the following changes:

• The rate for the 1st bracket goes down to 35.82%.
• The rate in bracket 2 goes up slightly to 37.48%.
• The rate in bracket 3 remains 49.50%.
• The general tax credit (AHK) will be €335 lower.
• The income at which the AHK starts phasing out is linked to the level of the minimum wage. At the minimum income, the maximum AHK applies. The level of the AHK will continue to depend on the level of income. Low incomes will get the maximum AHK. From a certain income, the AHK becomes lower and lower.

Tax deduction for transport costs in case of illness or disability easier
From 2025, the government wants to simplify the tax deduction of transport costs in case of illness or disability.

• The government proposes that from 2025, people can deduct a flat rate of €0.23 per kilometre from income tax when they have to travel by car to, for example, a doctor, hospital or pharmacy. People will then have to keep less records. Currently, citizens still have to calculate each year what the car costs per kilometre are and keep receipts for such things as fuel, insurance and maintenance. Under the new proposal, this will soon no longer be necessary. For travel expenses incurred by taxi or public transport, the fare remains deductible.
• The government proposes that people who have additional transport costs due to illness or disability will be allowed to deduct a fixed amount of €925. These are people who have more transport costs due to their disability than people without disabilities. People may deduct this amount because, for example, they need a bigger car to transport a wheelchair. Only people who cannot walk more than 100 metres independently or with aids are eligible for the tax deduction. Now, people can deduct the extra transport costs incurred and they have to compare the car costs with people without disabilities. Under the new proposal, this is no longer necessary.

With these government plans, people with an illness or disability will have to keep less records. It will be easier to calculate expenses incurred, as a fixed amount of expenses will be deductible. As a result, there is less risk of errors. The scheme is also easier to implement by the tax authorities. This is because the inspection is simpler.