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.

123 Comments

  • 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,

  • Reply Peter 30/07/2019 at 19:13

    Hi Bastian,

    Thanks for your post, I have worked in 2018 only for 3 months, is it okej to not declare taxes for that year

    • Reply Bastien - Settle in Berlin 31/07/2019 at 09:36

      hey peter. yes.

  • Reply Karan Jaswal 01/07/2019 at 16:04

    Hi Bastein,

    I have a question regarding the Fundraisers. I have started a campaign for one of my cousin living In India suffering from Chronic Kidney DIsease. Because the online fundraiser is not working for the Asian countries, I have to ask for the donation in my account here in Germany. My question is if this donation what I will receive in my account is tax-free or am I liable on it?? It should be somewhere around 7k to 8k EUR.

    • Reply Bastien - Settle in Berlin 02/07/2019 at 22:48

      Hey there. That would require the opinion of a professional but donation falls under the normal income tax rate. It would be tax free if you were to donate that money to a charity, which could produce a receipt to let you put it off in taxes. (You earn the money by gathering it but give it to the charity right away)This source tells me that you can put donations off up to 20% of your yearly income.

  • Reply Helena 21/06/2019 at 00:16

    Hi Bastien, thank you for your help. I am in a situation where I have been working full time for the whole year so far i.e. Jan-August (and the two years before that) but from end of August my contract ends. Then I have a type of scholarship from a university but unfortunately it appear that it is actually Honorarvertrag. It is only for two months and the total is 5000 euros which is obviously less than 8000 per year. But my question is: is the 8000 threshold you mentioned valid in my case? Or is it not because I was already receiving income/paying taxes from Jan-August? Thanks in advance for your help!

  • Reply Manou 13/05/2019 at 10:21

    Hi Bastien,

    Thanks for your website and for sharing this info. There is something i am not clear about: the first 8,004 € are not supposed to taxed. How does it work when being taxed at the source ? Do we receive your salary without paying taxes for the first 8,004 € OR is this exclusion not taken into account when the tax rate is applied (and I therefore will need to file a tax declaration to get some money back )?

    Similarly for the tax church, I am not religious and therefore do not want to pay it. Will it be automatically withdrawn from my salary and I will have to claim it back in the tax declaration OR can it be taken into account by the tax authority when applying the tax rate at the source ?

    And finally for the child allowances : are they paid directly by the employer and subject to income taxes OR are they separately received by the employees ?

    I am also looking for a list of deductions (like educational cost, transport cost), with the maximum that may be deducted.. If you know where i could find this, that would be super helpful..

    Thanks a lot for this additional info !

    • Reply Bastien - Settle in Berlin 17/05/2019 at 14:14

      Hey Manou. No need to file a tax declaration, it will already be the right amount on the payslip. Tax Church: Take a look at this post on the topic. Child allowances: It doesnt go through your employer.

  • Reply malak 27/03/2019 at 22:16

    hi,

    i had a job offer of which they will pay me 2000 before any deduction. is this fair? how much should I negotiate it for? I am an architect with 3 years experience.

    • Reply Bastien - Settle in Berlin 31/03/2019 at 20:16

      Hey Malak. Maybe this post here would help?

  • Reply Chandan 01/03/2019 at 15:36

    Hi,

    My salary includes a fixed and a variable component. I belong to tax slab 1. Will the same percentage of deductions apply even to the commission component? It’s sporadic and is contingent on how much sales I register in a month.

    • Reply Bastien - Settle in Berlin 02/03/2019 at 20:31

      Hey Chandan. That’s an excellent question. From my quick research, it seems that the answer would be yes, as the contract defines the result of both components as the salary. Source.

  • Reply Arn0ld 01/03/2019 at 13:24

    Hi Bastien,

    Thank you for your post.

    We just moved to Germany and my fiance started working as a doctor. She received her first payslip and we assumed that first 9000eur will be a tax-free allowance. However, she got taxed (lfd.lohnsteuer) around 20% in her first month. I assume you can get the refund at the end of the year when you file the tax return. But is it possible to do some changes now and receive the next salary untaxed until you reached the 9000 eur threshold?

    Thank you in advance for your answer.

    • Reply Bastien - Settle in Berlin 02/03/2019 at 20:20

      Hey Arnold. Is the difference simply not the gross salary after income tax and obligatory health insurance contributions? I don’t really understand the question here.

  • Reply sathya gajjala 29/01/2019 at 21:07

    Hello. I work as a Tragwerkspläner ful time in Frankfurt. My monthly gross salary is 3500 Euros and my net salary is 2200 Euros . I am planning to make some extra cash and thinking of working a Mini job. I want to know if this is allowed ? And will I come under Tax class 6 ?

    • Reply Bastien - Settle in Berlin 31/01/2019 at 15:16

      Hey Sathya, yes you are allowed to take on a mini-job aside from your main job. Tax class 6 yes. More info here.

  • Reply Bheema 09/01/2019 at 16:13

    Hi I worked in Germany 3 months ,from March -1-2018 to may_26_2018.
    And my monthly salary is 6000EUR
    But my take home salary is 3900EUR, after deducting Tax around 1400Eur per month and 900 EUR for my accommodation etc .
    My question is how much should I get tax refund ?

    • Reply Bastien - Settle in Berlin 10/01/2019 at 13:37

      Hey Bheema. That’s not possible for me to say as there are many parameters involved. It’s probably worth it to apply for one though. See this post for more info.

  • Reply Nick C 28/12/2018 at 12:42

    Hi Bastien. Thanks a lot for sharing your knowledge! I’ve recently moved to Berlin and am wondering how the tax free allowance works in practise when working as an employee. Checking my payslip for my first two salaries I appear to have been taxed at the normal rate without a tax free allowance. Will this over-payment be reimbursed to me at the end of the tax year? Or will I need to discuss this with my employer to adjust this? In addition to this, is the Steuererklärung something I will just receive or do I need to file this myself?

    • Reply Bastien - Settle in Berlin 29/12/2018 at 20:51

      Hey Nick. As an employee, it’s not an obligation to file a tax declaration. If you want to do it, more info on how to this way. As for the rest, it’s not really possible to say based on this brief description. Getting in touch with your HR department is a good idea here.

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