Mothers' personal income tax exemption significantly increases the amount of childcare benefits
As a result of the personal income tax exemption for mothers under the age of 30 and mothers with four children, the amount of the infant care fee (CSED) and the child care fee (GYED) will also increase, thus providing additional financial support to the affected families. The Mária Kopp Institute for Demography and Families (KINCS) calculated what exactly this means in practice.
According to the announcement of Prime Minister Viktor Orbán at the end of last year, as of 1 January 2023, women who have children before the age of 30 will also be exempt from personal income tax, similar to mothers with four children who have not had to pay a personal income tax since 2020. This affects not only wages, but also childcare benefits, the amount of which increase significantly.
Ágnes Hornung, State Secretary for Families, previously said that the amount of the infant care fee (CSED) - which mothers receive for 168 days immediately after giving birth - has been equal to 100 percent of the previous salary since July 2021. Basically, this is being reduced by the 15 percent personal income tax, but since women who give birth before the age of 30 and women who give birth to their fourth child are also exempt from the payment of the personal income tax, they can receive the same amount of infant care fee as their previous gross salary. The personal income tax exemption can be made use of up to the average wage, that is HUF 500,000, so mothers under the age of 30 and with four children can save up to HUF 75,000 per month.
The child care fee (GYED) is being disbursed from the age of six months to the age of two years of the child. This amounts to 70 percent of the previous salary, capped at HUF 324,800 gross in 2023, besides the receipt of which mothers can work even full-time. The amount of the child care fee may increase by 20 percent as a result of the personal income tax exemption, since only the 10 percent pension contribution is deducted from it, and the 15 percent personal income tax not. This may mean an increase of nearly HUF 50,000 per month for mothers receiving the child care fee maximum.
For young couples who decide to have children, this means that their net income can increase even by a third after they start a family. For example, a young 27-year-old couple who earn HUF 400-400,000 gross each, before starting a family, can calculate with a total net of HUF 532,000. If they get married and have their first child, due to the PIT exemption of the mother, the family tax allowance, the tax allowance of the first spouses and the use of the family allowance their net income will increase to HUF 693,000, that is, they will earn 30% more. In addition, in 2023, the HUF 10 million subsidy for young married couples can be applied for under unchanged conditions, which will turn into an interest-free loan immediately after the birth of the child. If the mother had a student loan, the state will release its amount in full.
All of these options help ensure that couples in their twenties have as few financial obstacles as possible to starting a family and do not have to postpone having children.