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.

112 Comments

  • 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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