German income tax

We are all adults here and we all know that at some point, we have to deal with the petty and boring things of adulthood. Knowing about the German income tax is one of those things. It’s always useful to know how much your fair share to the community is.

German income tax simply explained

Bear with me okay ?

The German income tax in a nutshell (bear with me)

The German income tax is known as “Einkommensteuer“. For employees who have their wages as their only income, it’s fairly straightforward.

Employees will pay the tax called “Lohnsteuer” directly at the source, from your pay slip. It is taxing the income you will get in your pocket in exchange of your work force. It means that your employer will deduct the corresponding sum off your gross wage and transfer it to the state. The rate to which you will pay the German income tax depends on how big the number is on your pay check. If you want to know how high that number should be, i have also written a long piece about a salary in Berlin and what it should be. If you don’t have any alternative sources of income, it pretty much ends there.

However, other sources of income fall under taxation as well like revenue from rental investment, stock exchange operations or exceptional situations when selling a car, a house. If you are a landlord, then it will tax the rent you get from the tenants.

After the end of the year, going through your tax statement “Steuererklärung” lets you communicate exactly to your tax office what you have earned during that year. You are also able to state expenses eligible for tax cuts, whether you are an employee, self-employed or generally with multiple income sources. It is then possible to reduce your rate by a few hundred euros, or even get a few hundred euros back!

I have written a full guide on how to do your tax return in Germany here.

 

German income tax rate for a single person :

  • Until 8,004 € a year : not taxed
  • From 8,005 €  until 52 882 € a year : tax-level between 14 % to 42 %
  • From 52,882 € a year : 42 %
  • From 250,731 € a year : 45 %

Tip 1: Get married ! The German income tax sharply decreases for families (up to 7000€). It might be a good time to start looking for a wife/husband.

Tip 2: There are number of ways to grab a few more euros out of your gross salary like subscribing to a private health insurance or getting compensated for the commute you do everyday to go to work. It might worth investigating. If you have already bought a flat or a house, you can get tax returns if you decide to renovate it.

Tip 3: If you are bit lost or you need advice, it’s very common in Germany to call a tax specialist (Steuerberater) to help you optimize your tax returns. You can also use online tools like this one.

24 Comments

  • Reply Amit 22/11/2017 at 10:18

    Hi ,
    My question is realted to tax class change .
    Currently I am liviing in Munich
    I am married person having one child.
    My family will join me in the next month i.e. Dec 2017.
    I will apply for tax class change from tax class 1 to 3.
    If i change my tax class to 3 , am I eligible for tax refund according to tax class 3 or tax class 1 for year 2017?

    • Reply Bastien - Settle in Berlin 23/11/2017 at 18:56

      Hi Amit. No, your tax rate will be different for that one month only.

  • Reply Tsvet Spasov 21/11/2017 at 21:51

    Hello,
    there are some interesting questions here and I would like to get involved as well.
    I am currently living and working in Munich and I am a British citizen. I am thinking about buying an apartment in Munich and I want to rent it out.
    As soon as I buy the apartment I want to move back to the UK and rent out the apartment.
    Let’s say for argument sake that my monthly rental income is 1000 Euros. How much tax would I have to pay annually?

    • Reply Bastien - Settle in Berlin 23/11/2017 at 18:58

      Hi Tsvet, there are so many factors impacting this; impossible for me to say. Depends on your situation as a tax payer and the local tax laws in Bayern.

  • Reply Emma 03/11/2017 at 23:56

    Hey,
    I have a question, can you please answer as soon as possible, it’s really important….I am currently working a mini job (30 hours a week), that will end on 14.01.2018. And I just found a new job (full-time job, 40 hours a week). I plan to stop the mini job after the expiration of the contract.

    My question is, can I do both jobs at the same time? what will my tax situation be?
    Thank you for anticipated answer and suggestion.

    Best regards

    • Reply Bastien - Settle in Berlin 06/11/2017 at 18:58

      Hi Emma. Yes, you can have both occupations at the same time as long as both employers know and agree to the other job in the contract. From a tax perspective, it doesn’t change your tax class but you have to make sure you are allowed to work these many hours.

  • Reply Sabah 28/10/2017 at 21:36

    Hello,

    I need to understand Rentenversicherung concept. I have started to deduct from my salary every month as I have the Blue card and they asked me that I should pay Rentenversicherung which i had started. But how and when i can get this money back ?
    Will i get back whole money ? or German rules deduct something. please explain in detail.
    Thanks
    SS

    • Reply Bastien - Settle in Berlin 31/10/2017 at 09:13

      Hi Sabah, this is not income tax although it is deducted from your salary also. This money goes to your public pension scheme. You can transfer these rights to your home country’s scheme if there is an agreement between both countries.

  • Reply Max 30/09/2017 at 06:41

    Hello,
    I have a question,
    I am working right now in a social year Freiwilligensocialjahr – bethel and they pay my taxes, so my question is if I finish it or stop working, do I need to pay tax or not?
    If yes how do I inform myself about it?
    Max

    • Reply Bastien - Settle in Berlin 30/09/2017 at 10:44

      Hi Max, you won’t need to pay extra income taxes if that’s what you ask. Inform yourself about it by googling it or by asking your whoever employs you.

  • Reply Dima 28/06/2017 at 22:09

    Hi, I moved to Berlin in July 2016 and was officially registered in the same month. I’m on a part time contract with an employer outside of Germany and that’s my only source of income. So when am I supposed to pay my first instalment of income tax?

    • Reply Bastien - Settle in Berlin 29/06/2017 at 10:02

      As a German resident, you will need to declare this income as part of your Steuererklärung. To avoid double taxation, you will need to submit a “Doppelsteuerabkommen”; a bilateral agreement with whatever country where your employer is.

  • Reply Yon 24/06/2017 at 20:19

    Hi,

    I have question.
    I work on a cayman island registered vessel as a seaman.
    And I live in germany.

    The company that pays me is from outside Germany.
    And I want to get paid into my german bank account.

    Will I just have to pay regular income tax
    over that?

    Best

    Yon

    • Reply Bastien - Settle in Berlin 26/06/2017 at 10:00

      Hi Yon. That would a question for an expert, especially if work on international waters registered under a cayman island pavillon. You might have to prove that you paid your income tax already. Ask a Steuerberater.

  • Reply Ina 24/05/2017 at 14:58

    Hello,

    What would be the expected tax over a received severence payment? My employer might compensate me with up to 3 yearly salaries for a mutual cancelation of my working contract, but I am not aware how much tax over the gross amount I will have to pay.

    Thanks in advance!

    • Reply Bastien - Settle in Berlin 28/05/2017 at 12:16

      Hi Ina. This would account for an extra-ordinary income. A quick search uncovered this tool to calculate what would be left from your severance payment (“Abfindung”).

  • Reply Yasmine 24/05/2017 at 12:20

    Your website is really really helpful. Well explained , with humour and lightness….just what this topic needs.

    Thank you very much.

    Yasmines

  • Reply Mandi 27/04/2017 at 12:46

    Hi,

    I have a question regarding changing tax category, but as I didn’t found a more a appropriate place in this internet site I’m posting it here.
    I have been in Berlin from almost 3 month, and at the end of this month I got married. My wife has not joint me yet as her reunion visa will be ready only in September. My question is if I can already change my tax category so that I can reduce my taxes?

    Thanks in advance

    • Reply Bastien - Settle in Berlin 28/04/2017 at 09:53

      Hi Mandi. It would only make sense if you were to wait for your wife to be here to change your tax class. Having a different tax class than your wife is only cutting your taxes if you married in the eye of the German law, and if she has a much lower income than you. When those 2 conditions are fulfilled, then you can switch.

  • Reply Miklos 21/11/2016 at 20:02

    “tax-level between 14 % to 42 %” is totally useless if one wants to calculate the income tax.

  • Reply Sooty 09/06/2015 at 14:58

    Thank you …..

  • Reply Alexander 08/06/2015 at 21:10

    Hi. Usualy, Germany will not tax your Pension when it is already taxed in the UK. But it will take it into consideration when determining the tax rate on any other income taxable in Germany (like employment income). This functionality is called ‘progression clause’. The actual effect on the German taxes will depend on the amount of your income taxable in Germany and, of course, the annual total of your income from the UK Pension.
    Please note, the answer is just based on the rough facts of your questions. I agree with the general advise: ask a professional tax advisor with some experience on expat or international tax. Best, Alexander

  • Reply Sooty 07/04/2015 at 17:40

    Hello
    What happens if you are living on a uk pension that is already taxed in the uk and is worth thruppence?
    Cheers Sooty

    • Reply settle_in_Berlin 14/04/2015 at 15:07

      The best might be to ask a Steuerberater. Whenever you have more than one income source, it’s best to go with a professional.

    Leave a Reply