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.

53 Comments

  • Reply Aleksandar Perišić 06/07/2018 at 08:37

    Hi,

    I should move to Berlin from 01.08. Wife and kids will stay at home, outside EU, until they got a papers. Am I need to declare tax category 1 or 3? In case category 1, have I some opportunities for smaller tax amount because I have wife and kids outside EU?

    Thanks

    • Reply Bastien - Settle in Berlin 06/07/2018 at 21:55

      Hi Aleksandar. The Finanzamt will put you in the most appropriate category when you register. No need to worry about that for now. You can change the category when you partner registers here and your partnership is made official here too, if you want.

  • Reply Emilie 05/07/2018 at 15:01

    Hello over there .
    Me and my boyfriend are blue card holders and we just got a full time job in Munchen . Me the woman earn 42000€ brutto per year and my boyfriend 45000€ per year . So we will get married this month so can you tell me please which categories should we choose after we get married and how much we will earn netto per both because I really don’t get it how much we will earn with these salaries neto . Thank in advance

  • Reply Paulinho 02/07/2018 at 13:27

    Hello all, I have a question regarding the Classes of Salary. Has I was investigating if I’m marryed I might drop for Class3 from Class1, meaning more money, ok. I’m Portuguese, if I get marryed here and my wife stays in Portugal making the discounts but I discount to Germany, I get to class3? Or my wife should be also discounting to Germany? Dunno if you understood my question.
    Thanks

    • Reply Bastien - Settle in Berlin 06/07/2018 at 21:36

      Hi Paulinho. I am not not sure. Have a look at this post here for more info. If both people are German resident, it would make most sense that one of you in on class 3 and the other is 5.

  • Reply nina 16/06/2018 at 19:09

    Hi,
    I’m currently doing a master program in Germany. I do not work as my schedule is super packed this semester. However, I found a way to make some extra cash, it’s called domain flipping: basically, i buy domain names and then sell them at a higher price. Do you have any idea about whether there is a tax rate on the profit i make from this? assuming i do this just twice a year(a side hustle) and i make 2000 euros in total this year from selling 2 domain names.
    Thank you in advance.

    • Reply Bastien - Settle in Berlin 22/06/2018 at 14:08

      Hi Nina. You need to declare any income you have while being a resident in Germany. For any income below 8.600€ per year, there is no income tax applied.

  • Reply raulph 19/05/2018 at 22:13

    Hello,

    I paid tuition fees in 2014 & 2015 but started a full time job only from Jan ‘2017. Can the tuition fees be tax deductible for the income in year 2017?

    With no income from 2014-16 it seems logical that I can claim tax deduction in 2017 when I actually started a full time job.

    Appreciate your time in reading & replying to this…

    • Reply Bastien - Settle in Berlin 22/06/2018 at 14:35

      Hi Raulph. You can do a tax return for 2017 and i believe put some or all of the tuition fees for that year, as “Ausbildung/Weiterbildung kosten” can be put off up to 3 or 4 years after the year the fees were paid. Better check that yourself but that would be possible in my opinion.

  • Reply waqas 28/02/2018 at 19:13

    I am working as a werkstudent on student visa in an IT company and posses a student visa. In my allowed legal working hours, I am paying taxes and pension out of my salary (it gets automatically deducted). Does it count as taxes to apply for german settlement permit?

    • Reply Bastien - Settle in Berlin 28/02/2018 at 20:04

      Hi Waqas. This goes beyond my knowledge i’m afraid.

  • Reply Michelle Stobart 27/02/2018 at 22:36

    I’m a US citizen who teaches yoga and does massage. I’ve been invited to teach in a German Yoga Studio for a limited engagement. I expect I’ll make 1000 € or
    less. Am I required to pay into German taxes? I will be required to claim my income on my US taxes.

    • Reply Bastien - Settle in Berlin 28/02/2018 at 20:04

      Hi Michelle. You are not a German resident and i suppose you will bill from your US business, so no is probably is the answer.

  • Reply Mary Taylor 14/02/2018 at 10:54

    Hi, I am trying to send my taxes through Steuergo.de online submission and I am told that my pin isn’t right. I don’t really remember ever creating a pin. Do you know anything about this.

    • Reply Bastien - Settle in Berlin 14/02/2018 at 22:52

      Hi Mary. Get in touch with their customer support about this.

  • Reply Mel 13/02/2018 at 12:49

    Any idea on the tax rules if you own a property abroad (within EU) which is rented out.
    What happens if you sell it, do you pay tax to germany?

    • Reply Bastien - Settle in Berlin 14/02/2018 at 22:45

      Hi Mel. You should probably get in touch with an expert about this. If you are a German resident, you need to pay income tax, regardless of the income’s source or location.

    • Reply RiceBowl 07/03/2018 at 06:44

      Any income that you receive no matter from where in the world, is taxable in Germany if you spend more than 181 days on German soil. If you already paid taxes in the place where your property is located, you need to contact the tax office and check if there is a double-taxation agreement between Germany and this country. If there is one, you can either be exempted or claim the double-paid amount back. Otherwise things will get complicated and you leave money on the table.

  • Reply aaron 02/02/2018 at 08:29

    Is it correct that the steuerklass is important just for the monthly paid tax that is being deducted from the paycheck every month (like pre payments), and that at the end of the year after reporting the actual income to the finanzamt, they will calculate how much tax we were supposed to pay according to the real income? If it’s true, how can I know how much tax me and my wife have to pay at the end?

    • Reply Bastien - Settle in Berlin 05/02/2018 at 20:17

      HI Aaron. The statement at the end of year allows you to adjust the total taxable income by declaring tax relief items, or else additional income. You can see the difference in taxable income by using simulation apps like this one here for example.

  • Reply Donnations Art Field 29/01/2018 at 23:31

    I live actually in Berlin and I’m rich. I’m doing privately online also, occasionally, for free art consultings. Comes eventually who can feel, voluteer donations. The donations comes in my german bank account. Do I have to pay taxes on this donations that comes from artists?

    • Reply Bastien - Settle in Berlin 01/02/2018 at 19:29

      Hi there. Donations are still considered an income and must be declared as such, probably as results of a “Liebhaberei/Hobby”. Source

  • Reply Iqbal 09/01/2018 at 12:29

    Respected sir/madam,

    Could you help me please, I want to know about tax class I am married and I have 4th class. I have one part time job if I do one more part time job then my tax class would be changed or not?

    Thanks in advance!

    • Reply Bastien - Settle in Berlin 10/01/2018 at 22:53

      Hi Iqbal. It depends who is the biggest earner (3/5) is your couple, or if you are eearning the same (4/4 for each)

      • Reply Iqbal 08/02/2018 at 20:02

        Thanks so much sir for replying.

  • Reply Magdalena 11/12/2017 at 11:59

    Hi, I have a question too, if you can help me out 🙂

    I will be working in Berlin for 6 months next year, as a Erasmus student.
    I will work full time for 1550 Eur, personal insurance and liability insurance will be covered by me, and accident insurance by my company.

    As I understood from researching, I will belong to the 1st class of taxes, but I am interested if students have some special procedure for taxing?

    Thank you in advance,

    • Reply Bastien - Settle in Berlin 13/12/2017 at 22:45

      Hi Meggie. Students can apply for a tax return the same way as employees.

  • 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 johnniee 01/07/2018 at 20:22

      +1

  • 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.

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