Child Reaches the Age of Majority – Impact on Child Benefits and the Child Tax Credit

Children have different financial implications for parents. The focus is on child benefits, but also on tax changes, such as the child tax credit. For most parents, it is clear that benefits are paid or that they are entitled to tax breaks when their children are young. However, when a child reaches the age of majority, the question often arises as to how this affects child benefits and tax allowances. Reaching the age of majority often also involves a transition to vocational training, higher education, or employment. In this article, we’ve summarized all the key aspects for you. As tax advisors, we’re familiar with the common questions taxpayers have in this situation.

Background: What effect does reaching the age of majority have?

First, it is important to know that before reaching the age of majority, there is always an entitlement to child benefits and tax allowances. Once the age of majority is reached, we must remove the “always” from the previous statement. After a child turns 18, the entitlement to these benefits generally continues. However, it must be assessed on a case-by-case basis whether the necessary conditions are met.

For a child of legal age to continue to be eligible for child benefit and tax benefits, they must be in an apprenticeship or pursuing a degree. It should also be noted that the entitlement only lasts until the age of 25. To meet the requirements, a traditional apprenticeship must be in place or a certificate of enrollment must be available for students. The following activities also qualify for child benefit and tax allowances:

• Voluntary social or ecological year
• Federal Voluntary Service
• European/Development Policy Voluntary Service
• Volunteer service for all generations
• International Youth Volunteer Service
• Other service abroad

One problem many parents face is that their children cannot immediately begin one of the aforementioned activities after finishing school. There is often a transition period between graduation and further education or employment. Child support and tax credits continue to be paid as long as the transition period does not last longer than 4 months.

What happens after completing an education program?

Now let’s take it a step further and address the question of what happens when the child has completed their training or studies. Often, the child has not yet turned 25 at the time of graduation. First, it’s important to note that the entitlement to child benefit and other tax benefits ends as soon as the child begins working after completing their education. It doesn’t matter whether they have turned 25 yet. However, there are situations that allow you to continue receiving child benefit and tax benefits. The following conditions must be met:

• Not yet 25 years of age
• No gainful employment after completing education
• The child is pursuing further education, a bachelor’s or master’s degree, or performing voluntary service

The concept of gainful employment must be clarified in this context. In this case, the tax office only considers work to be gainful employment if the child works more than 20 hours per week. A training stipend is, of course, not taken into account in this calculation. The focus is solely on a contractually agreed employment relationship. A 450-euro job or working as a student trainee is therefore possible without any issues.

What happens when the child turns 25?

As we have already mentioned, after turning 25, you are no longer entitled to the traditional benefits and payments. However, expenses for the child’s support or education can still be claimed as extraordinary expenses on your tax return. This way, you can at least recover a certain amount through your tax return. However, it’s important to note that there are various factors and limits regarding the deduction of these costs. Additionally, the so-called “reasonable personal contribution” must be taken into account. Only after a certain amount has been exceeded are the expenses actually considered tax-deductible. Since this topic involves many individual factors, we do not wish to delve deeper into it here. Instead, we recommend that you schedule a consultation with a qualified tax advisor.

Special Provision for Children with Disabilities

There is a special provision for children who have been permanently impaired by a disability before the age of 25 and who cannot care for themselves due to the disability. Parents who must care for their disabled child are entitled to child benefit without limit. The age limit of 25 is also irrelevant in this context. In addition, there are various tax-free allowances and lump-sum amounts that can be claimed on the tax return.

What is the education allowance?

For parents who have a child of legal age who is pursuing vocational training or a degree but no longer lives at home, there is an additional tax credit. The tax credit to cover special needs related to vocational training amounts to 924 euros annually. This tax credit is independent of other tax credits and payments. However, an important prerequisite is that you are eligible for child benefit. In the case of divorced parents, the allowance can be split. For further information on the education allowance, we recommend consulting a qualified tax advisor.

Tax Consulting in Düsseldorf and Oberhausen

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