What is Tax Allowance?

A tax allowance (or personal exemption) is a fixed amount of income that is tax-free for everyone — or for specific categories of taxpayer such as the elderly, parents or low earners — applied before the tax brackets kick in.

Germany's Grundfreibetrag of EUR 12,096 (2026) ensures no income tax on the first EUR 12,096 of income — a basic-needs allowance recognised by the constitutional court. France grants a EUR 11,497 zero bracket, plus a EUR 1,000 family allowance per dependent under the quotient familial system.

Switzerland uses canton-specific allowances rather than a single federal figure. The federal direct tax has a CHF 14,500 zero bracket for single filers (CHF 28,300 for married). Italy applies the no-tax area mechanism for low earners (up to about EUR 8,500 for employees).

Beyond personal allowances, most systems grant special allowances: marriage splitting (DE), family quotient (FR), child allowances, disability allowances, age allowances. These can dramatically reduce the effective tax rate for families relative to single filers.

Example

A German parent of two children earning EUR 50,000 starts with a Grundfreibetrag of EUR 12,096 plus two child allowances of EUR 9,540 each. Taxable income is reduced by EUR 31,176, slashing the tax bill compared to a single, childless filer.

↗ Use the calculator

Income Tax Estimator

Estimate your net income and effective tax rate for Switzerland, Germany, France and Italy.

Open calculator →

Related terms

Tax Deduction

A tax deduction is an expense or contribution that you can subtract from your gross income before calculating taxable income, reducing your tax bill by the deduction multiplied by your marginal tax rate.

Tax Credit

A tax credit is an amount subtracted directly from the tax you owe — not from taxable income — so each franc or euro of credit reduces your tax bill by exactly one franc or euro, making credits far more valuable than equivalent deductions.

Income Tax

Income tax is a tax levied by governments on the wages, salaries, business profits and other earnings of individuals and corporations, usually charged at progressive rates that rise with the amount of income.

Payroll Tax

Payroll tax is the broad term for taxes and social contributions calculated on wages — including pension, health, unemployment and family-allowance contributions — typically split between employer and employee and remitted by the employer.

Frequently asked questions

Allowance vs deduction?+

An allowance is a fixed automatic amount everyone gets; a deduction requires the taxpayer to incur a specific expense.

Is the allowance adjusted yearly?+

Yes in most countries — to track inflation and avoid bracket creep.

Can two spouses combine allowances?+

Yes via marriage splitting (DE) or family quotient (FR); Switzerland aggregates spouses' income with a married-rate schedule.