How taxes work in Germany

By Nicolas Bouliane

This guide explains how taxes work in Germany, and how to pay less taxes.

Tax calculator

This tax calculator shows your salary after taxes. It works for employees, students and freelancers.

€ € {{ showExtraQuestions ? 'Hide options' : 'Show options' }}
Disposable income Health insurance Public pension Unemployment insurance Income tax Solidarity surcharge Church tax
Health insurance

Your private health insurance costs per month.

Public pension

Public pension insurance pays for your pension when you retire.

Your employer pays

You pay

Unemployment insurance

Unemployment insurance pays for unemployment benefits if you lose your job.

Your employer pays

You pay

Income tax

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Taxable income

Income tax rate

Solidarity surcharge

If you pay more than /year in income tax, you must pay a solidarity surcharge. It's a percentage of your income tax.

Solidarity surcharge is {{ formatPercent(taxes.solidarity.milderungszoneRate * 100) }} of all income tax above .

The solidarity surcharge is {{ formatPercent(taxes.solidarity.maxRate * 100) }} of your income tax.

Church tax

Your church collects a church tax. In {{ germanStates.names[germanState].en }}, the church tax is {{ formatPercent(result.churchTaxRate * 100) }} of your income tax.

Your income is too low to pay income tax, so you don't pay church tax.

You pay {{ formatPercent(100 - disposableIncomeRatio) }}

This is what you pay for all taxes and social contributions.

You keep {{ formatPercent(disposableIncomeRatio) }}

This is your net income. It's how much money you keep after taxes and other deductions. It's your money. You can spend it.

The taxes you pay in Germany

All German residents must pay taxes. These are the taxes to pay:

If you are an employee, your employer collects taxes directly from your paycheck. If you are self-employed, you pay taxes by bank transfer or direct debit.

Income from investments is taxed differently.4 You pay:

Income and salary tax

All German residents pay income tax (Einkommensteuer). This tax is a percentage of your income. It’s a progressive tax, so if you earn more, you pay a bigger percentage of your income.3

If you earn less than 11,784€ per year, you pay no income tax. If you earn the median income, your income tax is around 18% of your income. The maximum income tax is 45% of your income.1

If you are an employee, you pay a salary tax (Lohnsteuer) on every paycheck. This is a prepayment of your estimated income tax. If you pay too much salary tax, you can make a tax declaration and get money back.

Usually, tips are not taxed.6

Health insurance

All German residents must have health insurance (Krankenversicherung). Health insurance pays for your healthcare when you are sick.

There are three types of health insurance:

If you are an employee, your employer pays half of it. If you earn less than 505€ per month, you can use your parents’ or spouse’s health insurance for free. Students get a cheaper tariff.

How to choose health insurance

Nursing care insurance

Nursing care insurance (Pflegeversicherung) pays for your healthcare when you are old. It costs 3.4% of your income. If you are over 22 years old, and you don’t have children, it costs 4% of your income.

If you are an employee, your employer pays half of it.

Public pension insurance

All employees must pay into the public pension system. It costs 18.6% of your income.

If you are an employee, your employer pays half of it, so you pay 9.3%.

If you are self-employed, public pension insurance is usually optional. If you don’t pay public pension insurance, you must make your own retirement plans.

Unemployment insurance

Unemployment insurance (Arbeitslosenversicherung) pays a percentage of your salary if you lose your job.

It costs 1.3% of your income.

Unemployment insurance calculator

Church tax

If you are a member of certain churches, you pay a church tax. It’s a percentage of your income tax.

If you live in Baden-Württemberg or Bavaria, it costs 8% of your income tax. In other states it costs 9% of your income tax.

You stop paying church tax by leaving the church.

Solidarity surcharge

If you pay more than 18,130€ per year in income tax, you must pay a solidarity surcharge (Solidaritätszuschlag). It’s a percentage of your income tax.

German tax calculator

Capital gains tax

If you make money from investments, you pay a 25% tax on income on all profit above 1,000€ per year. This is the capital gains tax (Kapitalertragsteuer). It applies to profit, interests and dividends from stocks, ETFs and other financial investments.

Revenue from cryptocurrencies is not taxed as an investment, but as a private transaction.5

Investment income is also subject to the church tax and solidarity surcharge.

Other taxes

All German households must pay the TV tax. If you run a business, you might need to pay the trade tax. Most things you buy have the value added tax included in the price. There is also the vehicle tax, the dog tax, property tax and a few others.

Taxes for businesses

If you are self-employed, you must pay…

You can choose to pay…

Your business must also pay…

Cost of running a business

Since you are self-employed, your employer does not pay half of your health insurance, pension insurance or unemployment insurance. This means that you pay twice as much for social contributions.

German tax classes

Your tax class affects how your salary tax is calculated. It does not affect how much income tax you pay. It only changes how much income tax you pay in advance, as salary tax.

You can change your tax class online with ELSTER. If you are self-employed, you might not have a tax class, because you don’t need to calculate your salary tax.2

There are 6 tax classes:

  • Tax class 1
    If you are not married, and you are not in any other tax class.
  • Tax class 2
    If you are not married, and you raise children alone. You get more tax benefits.
  • Tax class 3
    If you are married, and you earn more than your spouse. If you are in tax class 3, your spouse is in tax class 5.
  • Tax class 4
    If you are married, and you and your spouse have similar incomes. If you are in tax class 4, your spouse is also in tax class 4.
  • Tax class 5
    If you are married, and you earn less than your spouse. If you are in tax class 5, your spouse is in tax class 3.
  • Tax class 6
    This is the tax class for a second job. If you don’t have a tax ID, your employer might put you in tax class 6. You have no tax benefits, and you pay more salary tax.

How to pay less taxes

How to pay less taxes

Need help?

A tax advisor can answer your questions and help you file your German taxes correctly. You can also call or email your local Finanzamt.

English-speaking tax advisors in Berlin

Find your local Finanzamt

Sources and footnotes

  1. §32a EStG ⤴

  2. selbststaendig.de ⤴

  3. §32a EStG ⤴

  4. §32d EStG ⤴

  5. wendl-koehler.de ⤴

  6. orderbird.com ⤴