It varies. Generally, it ranges between 14-42%. This means that not all employees in Germany have the same tax rate. Whether single or married, having children or not, salary level, number of jobs, all these factors can influence someone’s tax rate to be higher or lower. There might be a perception that tax rates in European countries are generally higher. However, this is not an exception in Germany. Calculating taxes in Germany can be somewhat complicated. It’s important for you to understand the tax system well before coming to Germany. I will explain the tax system in Germany in a simple way in today’s blog.
Upon arriving in Germany, when you go to work for the first time or when you buy a house or car, you will be issued a tax ID. This is usually processed within 5-6 weeks. Your tax ID will contain all your tax-related documentation.
Tax classes in Germany
I mentioned earlier that Germany’s tax system is somewhat complicated. Here, taxpayers are generally classified into 6 classes for paying taxes. Each class has its own tax rates. Depending on which class you fall into, you will only pay taxes according to that class’s rate. Below is a detailed discussion of the 6 classes (Steuerklassen):
Class 1: Applicable for unmarried individuals or those whose spouse lives abroad.
Class 2: Applicable for individuals who are divorced or whose spouse has passed away, but they have children.
Class 3: Applicable for married individuals where one spouse works and the other does not.
Class 4: Applicable for married individuals where both spouses work and their salaries are equal.
Class 5: If the salaries of both spouses are not equal, the one with the higher salary will fall into this class. The other spouse can choose either Class 3 or Class 4.
Class 6: If an individual has multiple jobs or has another business alongside their job, they will fall into this class.
These are the 6 tax classes in Germany. I hope you now have a clear understanding of the German tax classes (Steuerklassen).
In Germany, what does tax cover?
If I talk about tax type then 2 types of tax type can be seen. Although this way of separating will not be taken from you. Once a part of the tax will be cut in shape. For your understanding I have divided German tax into 2 types. These types are:
1. Social Contribution Fee
Although it is referred to as the social contribution fee, it is primarily a type of tax. Within the social contribution fee, there are components such as health insurance, which has a rate of 15.8%. You do not have to pay the entire 15.8%; you will pay half of it, and the company or establishment where you work will pay the other half.
Next comes long-term care insurance, which becomes relevant when you become disabled and need nursing care. Its rate is usually 3.05%, and half of this amount is covered by you and the remaining half by your employer.
After that is pension insurance, which comes into play when you retire. Its rate is 18.3%, and similarly, you and your employer share the contribution.
Then comes unemployment insurance, which functions when you lose your job for any reason. It provides support to sustain your life until you find a new job. Its rate is 2.4%, and similarly, you will cover half of it, and your company will cover the other half. These are the components of the social contribution fee. I hope you now understand.
2. Tax
Generally, there are three types of taxes:
– Wage tax: This is the income tax. A portion of what you earn monthly will be deducted as income tax. This is called wage tax.
– Church tax: Church tax is generally applicable to Christians. It is not mandatory for non-Christians, and it is also not necessary for those Christians who do not wish to take membership in any Christian church.
– Solidarity surcharge: This is a fee paid for the reunification of East and West Germany, currently at 5.5%.
These are the taxes in Germany that will be deducted from your salary. I hope you now have a good understanding of the taxes in Germany.
How much tax do you have to pay based on your salary?
At this stage, I want to discuss how much tax you have to pay on your salary. If your salary is less than 9,984 euros annually, you will not have to pay any tax. However, you will have to pay social security contributions, which apply if you are single. If you are married, this amount doubles, up to 19,968 euros, and you will not have to pay any tax.
If your annual salary ranges between 9,985 euros and 58,596 euros, and you are single, your tax will be between 14% and 42%. This depends on the tax class you fall into.
Now, if your annual salary ranges between 58,597 euros and 277,825 euros, your tax rate will be exactly 42%.
If your salary exceeds 277,825 euros, you will be taxed at 45%. This is your tax rate. I hope you understand what kind of tax you may have to pay in Germany.
This is the tax calculation for the year 2024. Tax rates may change. It’s not impossible. If tax rates change, you should know them. I can help you with that. Below is a German tax calculator link. Click the link to find out the updated and actual tax.
