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 9 408 € a year : not taxed
  • From 9 408 € – 54 949€ a year : tax-level between 14 % to 42 %
  • From 54 950 – €260 532  € a year : 42 %
  • From 260 533 € 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. Here is a complete guide on tax deductions in Germany.

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.

139 Comments

  • Reply Rita Almeida 17/04/2020 at 00:32

    Hi Bastien, thanks for sharing!
    I have just got asked to pay 2k to the tax office. But my gross income is 10K less than what they calculate. In my form is correct but not in the letter they have sent back asking me to pay. Who’s mistake is that? One of my previous employers? Someone else using the tax number?
    Thanks a lot for your advice
    Best, Rita

    • Reply Bastien - Settle in Berlin 22/04/2020 at 14:53

      Hey Rita. You can simply call for the Finanzamt for more explanation. You also have a right to protest this and prove that you are right.

      • Reply S 07/07/2020 at 21:34

        Hello Bastien!

        Thank you so much for all this information. I am about to move to Berlin as a British citizen. I will be working for a company in China so will not receive income from Germany. I will not be registered in Berlin for my first two months there while working. Does one need a freelance visa in such a circumstance? How quickly should I get this in process to be able to work legally in Berlin and prepare to pay tax?

        • Reply Bastien - Settle in Berlin 12/07/2020 at 09:51

          Hey S. It’s a tricky one. You could theoretically still earn that income while being a british tourist in Germany, first registering when you can be officially employed by this Chinese company in Germany. Or am i confused here?

  • Reply Mira L 27/02/2020 at 12:57

    Hey Bastien, Thanks for sharing! I recently started a job in Berlin and I’m married my husband (we are both non German and non EU residents) is registered in Heilbronn. Are we allowed to have the couple tax? I’m worried because we are not registered in the same city. In this case which tax categorie I would have?

    • Reply Bastien - Settle in Berlin 04/03/2020 at 23:17

      Hey Mira. As long as you are both German residents and both taxable here, it should not be a problem to be in 3/5 tax class setup.

  • Reply SMF 19/02/2020 at 16:29

    Hi Bastien,

    I am planning on working remotely from our company’s Frankfurt office for 3 months. Will I be subject to German income taxes? Based on my (at this point) very limited research, it sounds like I would need to be a resident for 6+ months in order to become subject to German income taxes, but if you could let me know your thoughts, I would greatly appreciate it.

    Many thanks in advance,
    SMF

    • Reply Bastien - Settle in Berlin 24/02/2020 at 17:53

      Hey SMF, yes, in my opinion you are also right. You would not be considered a German resident. You’d pay your taxes like you would normally, unless there is some other agreement between your home country and Germany. Ask your HR department, in doubt.

  • Reply Anonymous 18/02/2020 at 00:42

    Hey Bastian and thank you for all of the info 🙂

    In 2019 I opened my freelancer account and I was working as an employee (12 payslips).
    For example, I earned:
    As a freelancer (Gross yearly): 3500
    As an employee (Gross yearly): 17700

    Any tip of how can I calculate my taxes?/Where should I apply to? Who can answer my questions?
    By the way, I am married but didn’t update the tax and my husband’s gross salary is less than mine, but if I understand correctly I can not change my tax class for 2019 in retrospective)

    Thanks 🙂

    • Reply Bastien - Settle in Berlin 24/02/2020 at 17:49

      Hey. You can use the simulator i linked to in the article for an estimate.

  • Reply al prab 10/12/2019 at 09:53

    Hello Bastien, I moved to Germany about a year ago as a Freelance IT professional. I have rental income in my home country (which goes into the local bank accounts) as well as rental income Germany. I have no professional income in Germany yet. Is the rental income in my home country (India) of consequence when calculating income here? Thanks in advance.

    • Reply Bastien - Settle in Berlin 17/12/2019 at 00:10

      Hey Al Prab. Any and all income, regardless of its origin, should be declared in Germany if you are resident here. You might want to check if there are tax treaties to avoid double taxation though.

  • Reply Peter 20/09/2019 at 23:49

    Hi I have a Question about GERMAN INCOME TAX.

    I got employed in october 2019 on a rate 50,000. € until December 2019.

    From January 2020 I will earn 60,000€

    So in 2019 I earn for October, November and December 12,500 € GROSS

    QUESTION: does this mean that for the 3 months I will only be taxed on the amount above the TAX- free allowance of circa 9,000 € ?

    Thank yoou for advice!!

    • Reply Bastien - Settle in Berlin 23/09/2019 at 16:29

      Hey Peter. The Finanzamt will look at your income for the whole year. So if that’s your total income of the year is that much, then that’s right.

      • Reply Lukas 08/11/2019 at 14:42

        That is interesting I have the same question ! But the taxes for the 3 months are paid as if you had made 50000 a year. So where is the money from overpaying the taxes collected ?

        • Reply Bastien - Settle in Berlin 23/11/2019 at 15:19

          Hey Lukas. I’m not sure i get the question here…

  • Reply Rahul 01/08/2019 at 00:42

    Hi, Bastien
    I am currently pursuing my masters at Otto Von Guericke Universität Magdeburg, so it goes without saying that I am registered at Finanzamt Sachsen Anhalt in Magdeburg. I would be moving to Berlin starting from September for 8 months since I have been offered an Internship in Berlin. The pay would be 700 € Gross. Now my question is, will I be taxed? If I will be, then how much would be my Net Income? I am wondering since it is just for 8 months, it definitely won’t be more than 8000€ per year.

    • Reply Bastien - Settle in Berlin 05/08/2019 at 11:05

      Hey Rahul. You can use the calculator linked in the post to see how much you net income will be,

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