German Home Savings Premium Increase: New Rates & Income Limits for 2021
If you're saving for a home in Germany, there's important news. The Bundesrat (Federal Council) has approved a reform to the Home Savings Premium Act (Wohnungsbau-Prämiengesetz), significantly boosting state support for future homeowners. These changes, passed as part of a broader tax law package, take effect for the savings year 2021 and offer more generous incentives for building wealth through home savings contracts (Bausparen).
The Wohnungsbauprämie (home savings premium) is a government subsidy designed to encourage homeownership among middle and lower-income earners. To qualify, your savings must be used for qualified housing purposes—such as building, buying, or renovating a home—and your annual contributions must meet a minimum threshold. The recent reform increases both the subsidy percentage and the income limits, making the benefit accessible to more people.
What Changed? A Clear Comparison
The key improvements are substantial. Let's break down the old rules (valid until the end of the 2020 savings year) versus the new rules effective for the 2021 savings year.
| Parameter | Old Rules (Until 2020) | New Rules (From 2021) | Change |
|---|---|---|---|
| Subsidy Rate | 8.8% of eligible contributions | 10% of eligible contributions | +1.2 percentage points |
| Max. Eligible Contribution (Single) | €512 per year | €700 per year | +€188 |
| Max. Eligible Contribution (Married Couple) | €1,024 per year | €1,400 per year | +€376 |
| Max. Annual Premium (Single) | ~€45 (8.8% of €512) | €70 (10% of €700) | +€25 |
| Max. Annual Premium (Married Couple) | ~€90 (8.8% of €1,024) | €140 (10% of €1,400) | +€50 |
| Income Limit (Single) | €25,600 taxable income | €35,000 taxable income | +€9,400 |
| Income Limit (Married Couple) | €51,200 taxable income | €70,000 taxable income | +€18,800 |
Understanding the Home Savings Premium: Key Conditions
To benefit from this increased state support, you must meet specific conditions defined by law:
- Qualified Purpose: The funds from your home savings contract (Bausparvertrag) or the first purchase of shares in a housing cooperative must be used immediately for housing purposes: construction, purchase, or modernization of owner-occupied residential property.
- Minimum Annual Contribution: You must save at least €50 per year into the qualifying contract.
- Not Employer-Subsidized: The contributions cannot be part of employer-sponsored asset-building schemes (vermögenswirksame Leistungen).
- Income Limit: Your taxable income must not exceed the new, higher limits (€35,000 for singles, €70,000 for married couples).
Why This Matters for Your Financial Planning
For individuals and families aiming for homeownership, this reform represents a tangible boost. The higher income thresholds mean thousands more households now qualify for the subsidy. The increased premium rate and contribution caps allow for greater annual state support, accelerating your path to a down payment.
This change is a crucial element of financial planning in Germany. If you are within the income brackets, strategically utilizing a Bausparvertrag with the state premium can be a tax-efficient way to build housing capital. It complements other home-buying strategies and should be discussed as part of a comprehensive financial advisory session.
The reform, passed under the "Law for the Further Tax Promotion of Electric Mobility and to Amend Other Tax Regulations," shows the government's continued, albeit updated, commitment to promoting residential property acquisition. For savers, it's an opportunity to secure more free money from the state toward one of life's most significant investments.
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