Income Tax (Einkommensteuer)

Einkommensteuer (income tax) is the main tax on personal income in Germany. Progressive rate of 14-45% applies to salary, business income and rental income. For employees, tax is withheld automatically by the employer.

If you work as an employee, this tax is deducted from salary before money reaches your account. If you're self-employed, you pay it yourself quarterly.

Tax Rates (2024)

Annual Income	Rate
Up to €11,604	0%
€11,605 – €66,760	14–42% (progressive)
€66,761 – €277,825	42%
Above €277,826	45%

The rate is progressive: you don't pay one rate, but different rates for different portions of income [1].

Example: with income of €50,000 you pay 0% on the first €11,604, then progressive rate of 14-42% on the rest. Effective rate comes to about 20%, not 42%.

What Is Taxed

• Salary (Gehalt) — employment income
• Self-employment income — if you're a freelancer or business owner
• Rental income — renting out property
• Interest and dividends — taxed separately with capital gains tax (Kapitalertragsteuer) at 25% rate [2]
• Pension — partially taxed (portion depends on retirement year)

What Is Not Taxed

• Kindergeld (child benefit) — €259 per month per child (2026) [3]
• Part of Elterngeld (parental benefit) — non-taxable portion up to €300 per month [4]
• Gifts — up to €20,000 from parents, up to €500,000 from spouse (once per 10 years) [5]

How It's Paid

For Employees

Employer automatically withholds tax (Lohnsteuer, wage tax) and transfers it to the tax office. You only see the net amount (Netto) in your account.

Tax classes (Steuerklasse) affect withholding amount:

Class	For Whom
I	Single, divorced
II	Single parents
III / V	Married couples (one earns more)
IV / IV	Married couples (incomes roughly equal)

For Self-Employed

Quarterly advance payments (Vorauszahlung, tax prepayment). Final settlement after filing annual return (Steuererklärung).

Tax office calculates advances based on last year's income. If income has dropped, you can request lower advances.

Additional Taxes

Added to income tax:

Tax	Rate	Who Pays
Solidaritätszuschlag (solidarity surcharge)	5.5% of tax amount	Only with income over €73,874 (singles) or €151,990 (couples) [6]
Kirchensteuer (church tax)	8–9% of tax amount	Members of official churches (Catholic, Protestant) [7]

Calculation example:

• Income tax: €10,000
• Solidaritätszuschlag (if applicable): €550 (5.5% of €10,000)
• Kirchensteuer (if you're in church): €800–900 (8–9% of €10,000)

Leaving the Church

If you're not a practicing believer, you can leave the church (Kirchenaustritt, church exit) and not pay 8–9% church tax. This saves about €1,000 per year with salary of €60,000.

How to exit:

1. Make appointment at Standesamt (registry office) or Amtsgericht (district court) — depends on federal state
2. Pay administrative fee €25–35
3. Receive certificate (Bescheinigung)
4. Inform employer — from next month Kirchensteuer withholding stops

Exit is legally irreversible, but you can rejoin the church later if you wish.

Tax Return

For employees, filing a return (Steuererklärung) is optional, but often profitable — average refund is €1,000 per year [8].

When return is mandatory:

• You're self-employed
• Annual income over €11,604
• Both spouses work and chose classes III/V

When worth filing voluntarily:

• Commuting expenses (Pendlerpauschale) — more than 20 km
• Professional expenses (courses, equipment)
• Work-related relocation
• Home office expenses (Homeoffice-Pauschale) — €6 per day, up to €1,260 per year [9]

Filing deadline: by July 31 of following year. With tax consultant (Steuerberater) — by end of February two years later.

FAQ

Not legal or financial advice.

I arrived in Germany mid-year — how is my partial-year income taxed?

When moving to Germany mid-year, the distinction between unbeschrankte Steuerpflicht (unlimited tax liability) and beschrankte Steuerpflicht (limited tax liability) becomes critical. From the moment you register your residence (Wohnsitz) in Germany, unlimited tax liability applies — meaning worldwide income is subject to German taxation. Income earned before the move in your country of origin may fall under Progressionsvorbehalt (progression reservation): it is not directly taxed in Germany, but it is used to determine the tax rate applied to your German income. In practice, this means the effective tax rate on income earned in Germany can be higher than if that income were the only income for the year. The specific treatment depends on whether a Doppelbesteuerungsabkommen (double taxation agreement, DTA) exists between Germany and the country of origin. Filing a Steuererklärung (tax return) for the year of relocation is mandatory for a correct calculation.

I was registered as a church member during Anmeldung — now Kirchensteuer is deducted. How do I leave?

This situation arises during Anmeldung (residence registration) when the question about Religionszugehorigkeit (religious affiliation) is answered with membership in an official church. To leave, a visit to the Standesamt (registry office) or Amtsgericht (district court) is required — the responsible office depends on the Bundesland (federal state). The administrative fee is EUR 25-35. Some states require an in-person visit; others accept written applications. The exit takes effect from the first day of the following month after the application. Kirchensteuer (church tax) already withheld before the exit date is not refunded retroactively. However, Kirchensteuer paid is recognized as Sonderausgaben (special expenses) and reduces the taxable base when filing the annual Steuererklärung (tax return).

My spouse doesn't work yet — which Steuerklasse combination to choose?

For married couples, the available combinations are III/V and IV/IV. With III/V, the working spouse in Steuerklasse (tax class) III receives significantly lower monthly withholdings, but when the other spouse starts working in Steuerklasse V, their payroll deductions will be disproportionately high. The IV/IV combination with Faktorverfahren (factor method) distributes the burden more evenly. Steuerklasse only affects monthly Lohnsteuer (wage tax) withholding, not the final annual tax liability — the annual Steuererklärung (tax return) equalizes the difference. If one spouse plans to receive ALG I (unemployment benefit) or Elterngeld (parental benefit), Steuerklasse III can be advantageous because these benefits are calculated based on net salary. Changes can be submitted through the Finanzamt (tax office) and take effect from the following month.

Why is my first paycheck so much lower than the gross salary in my contract?

The difference between Brutto (gross) and Netto (net) in Germany amounts to roughly 40-42% for a typical salary. From the Brutto, the following are deducted: Lohnsteuer (income tax, 14-42% depending on income), Solidaritatszuschlag (solidarity surcharge, 5.5% of tax amount — if applicable), Kirchensteuer (church tax, 8-9% of tax amount — if applicable). Social contributions include: Rentenversicherung (pension insurance) at 9.3% of gross, Krankenversicherung (health insurance) at approximately 8.15%, Pflegeversicherung (long-term care insurance) at 1.7-2.3% depending on whether you have children, and Arbeitslosenversicherung (unemployment insurance) at 1.3%. Online calculators such as brutto-netto-rechner.info allow estimation of the expected Netto amount. For those relocating from countries with lower tax burdens, the scale of deductions is often a significant surprise.

Do I need to declare interest from my bank account abroad?

Yes. Individuals with unbeschrankte Steuerpflicht (unlimited tax liability) in Germany are required to declare worldwide income, including interest from foreign bank accounts. Such income is reported in Anlage KAP (the capital income appendix to the tax return). Germany taxes capital income at 26.375% (25% Kapitalertragsteuer, capital gains tax, plus 5.5% Solidaritatszuschlag, solidarity surcharge). If tax on the interest was already paid in another country, it can be credited under the applicable Doppelbesteuerungsabkommen (DBA, double taxation agreement). Failure to declare foreign income constitutes Steuerhinterziehung (tax evasion) — a criminal offense. Even if the foreign bank does not report directly to German tax authorities, data is exchanged through CRS (Common Reporting Standard) — the automatic exchange of tax information between countries.

Sources

1. Bundesministerium der Finanzen — Income tax rate 2024 https://www.bundesfinanzministerium.de/Content/DE/Standardartikel/Themen/Steuern/Steuerarten/Einkommensteuer/einkommensteuer.html

2. Bundesministerium der Finanzen — Capital gains tax https://www.bundesfinanzministerium.de/Content/DE/Standardartikel/Themen/Steuern/Steuerarten/Abgeltungsteuer/abgeltungsteuer.html

3. Bundesagentur für Arbeit — Kindergeld 2026 https://www.arbeitsagentur.de/familie-und-kinder/kindergeld

4. Bundesministerium für Familie, Senioren, Frauen und Jugend — Elterngeld and ElterngeldPlus https://www.bmfsfj.de/bmfsfj/themen/familie/familienleistungen/elterngeld

5. Bundesministerium der Finanzen — Inheritance and gift tax https://www.bundesfinanzministerium.de/Content/DE/Standardartikel/Themen/Steuern/Steuerarten/Erbschaft-Schenkungsteuer/erbschaft-schenkungsteuer.html

6. Bundesministerium der Finanzen — Solidarity surcharge: exemption limits from 2021 https://www.bundesfinanzministerium.de/Content/DE/Standardartikel/Themen/Steuern/Weitere_Steuerthemen/Solidaritaetszuschlag/solidaritaetszuschlag.html

7. Evangelische Kirche in Deutschland / Deutsche Bischofskonferenz — Church tax https://www.kirchensteuer.de/

8. Statistisches Bundesamt — Average tax refund in Germany https://www.destatis.de/DE/Themen/Staat/Steuern/Lohnsteuer/_inhalt.html

9. Bundesministerium der Finanzen — Home office deduction https://www.bundesfinanzministerium.de/Monatsberichte/Ausgabe/2025/01/Inhalte/Kapitel-2-Fokus/die-wichtigsten-steuerlichen-aenderungen-2025.html