German Tax System
Contents
Before moving to Germany, it helps to understand the tax system, especially if you will be working there. Germany's main taxes are income tax (Einkommensteuer), social security contributions, the solidarity surcharge (Soli), VAT, and church tax.
Below we cover the income tax rates for 2026, how tax classes work, what you can deduct, and how to file your tax return.
In short: If you work in Germany, your employer withholds income tax from your salary every month. You pay nothing on the first €12,348 you earn in 2026. Above that, the rate rises gradually from 14% to 42%, with a top rate of 45%. On top of income tax, you pay social security contributions, and possibly church tax if you are a registered member of a church.
Individual Income Taxes in Germany
Anyone who lives and works in Germany pays income tax on their earnings. Germany uses a progressive tax system, meaning the more you earn, the higher the rate on each additional euro.
Your employer deducts income tax directly from your salary each month. This system is called Lohnsteuer (wage tax). To see what your gross salary becomes after tax, read our guide to the average salary in Germany.
How Do I Pay Income Tax?
In Germany, income tax is usually deducted directly from your paycheck by your employer through the Lohnsteuer system. Your employer withholds the tax from your salary and sends it to the tax authorities on your behalf. You do not have to do anything for this part.
What Is the Income Tax Bracket for 2026?
For the 2026 tax year, the brackets are:
| Taxable income (2026) | Tax rate |
|---|---|
| Up to €12,348 | 0% (tax-free) |
| €12,349 – €69,878 | 14% – 42% (progressive) |
| €69,879 – €277,825 | 42% |
| Over €277,826 | 45% (Reichensteuer) |
A few important things to understand:
- The €12,348 basic allowance (Grundfreibetrag) applies to everyone automatically. You do not need to apply for it.
- The rates between €12,349 and €69,878 are not a flat rate. They increase gradually using a formula, so you never pay the top rate on your whole income.
- 42% is a marginal rate, not your overall tax rate. Only income above the threshold is taxed at that rate.
Online Tax Calculator
If you want to find out how much you will take home after taxes in Germany, an online calculator can help. You enter your gross salary and a few details, and it estimates your net income after taxes and social security contributions. Good calculators factor in your tax class, the solidarity surcharge, church tax, and social security, so you get a clear breakdown of your take-home pay.
Use an online German income tax calculator to estimate your take-home pay after tax and social security contributions.
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Tax Classes in Germany
There are six tax classes in Germany (called Steuerklassen). The one you fall into affects how much tax is withheld from your salary each month.
- Class I: Single, widowed, divorced, or in a civil partnership. Also married persons not in classes II, III, or IV.
- Class II: Single, but entitled to the single-parent allowance.
- Class III: Married, where the spouse does not earn wages, is in tax class V, or has recently died.
- Class IV: Married (not separated), both earning and living in Germany.
- Class V: Married, where the other spouse is in tax class III.
- Class VI: People earning wages from more than one employer.
Advantages for married couples
Class III/V can increase your monthly take-home pay if your incomes differ a lot, but it often leads to a tax bill at year-end. Germany is phasing out classes III and V in favor of Class IV with the Factor method, which spreads the burden more evenly across the year and avoids surprise payments.
The Annual Tax Return: Income Tax Declaration
Filing an annual tax return helps you settle your final tax liability, especially if you have several income sources, large deductions, or are self-employed. The tax year follows the calendar year. The deadline to submit your return is normally July 31 of the following year. If you use a tax advisor, this deadline is extended.
So for the 2025 tax year, the self-filing deadline is July 31, 2026. If you use a tax advisor (Steuerberater), this extends to February 28, 2027.
In your return, you declare all your income, deductions, and credits. When you submit your income tax declaration (Einkommensteuererklärung) to your local tax office, it shows whether you overpaid and are due a refund.
If you are employed and taxed at source, you usually do not have to file a return, unless you changed jobs during the year or earned extra self-employed income.
Even so, filing is often worth it. If you were not in Germany for a full tax year, for example, you may be due a refund. The process can be time-consuming, so many students and expats use a service like Wundertax to file their income tax declaration online.
How to File Your German Tax Return (Step by Step)
Filing for the first time feels harder than it is. Here is the process from start to refund.
Filing your tax return in 5 steps
Gather your documents. You need your annual payslip (Lohnsteuerbescheinigung), your tax ID, and receipts for any expenses you want to deduct.
Choose how to file. Use the free official portal ELSTER, or a paid app like Wundertax that guides you in English.
Enter your income and deductions. Add your salary, then claim work expenses, commuting costs, and other deductions covered below.
Submit before the deadline. File online by July 31 of the following year, or later if you use a tax advisor.
Get your assessment. The tax office reviews your return and sends a notice (Steuerbescheid) showing your refund or any amount due.
How to Pay Less Tax
German income tax law lets you deduct many expenses from your income. If you want to pay less tax, consider the following options.
- File a tax return: Even if you are employed and not required to, filing often gets you a refund.
- Claim deductions: Include work-related expenses, medical costs, and childcare costs.
- Home office expenses: If you work from home, you can deduct part of your costs.
Tax advisor
It is a good idea to use a tax advisor (Steuerberater) to file your return, especially to estimate what you owe as a freelancer in Germany. Planning to work for yourself? See our guide on how to become a freelancer in Germany.
Social Security Contributions
On top of income tax, employees pay mandatory social security contributions. These cover pension, health, long-term care, and unemployment insurance. They are split roughly 50/50 between you and your employer, so your payslip shows your half only.
As an employee in 2026, your share is approximately:
- Pension: 9.3% of gross salary (up to €101,400/year)
- Health: about 8.75% of gross salary (up to €69,750/year)
- Long-term care: 1.8%, or 2.1% if you are childless and over 23
- Unemployment: 1.3% of gross salary (up to €101,400/year)
Contributions are only charged up to the income ceiling. Earnings above that cap are not subject to contributions. Health Insurance is mandatory from day one in Germany, so it is worth comparing your options early. See our guide to Health Insurance in Germany.
What Can Expats Deduct?
German tax law lets you deduct a range of expenses from your taxable income. A flat €1,230 work-related expense deduction (Werbungskostenpauschale) is applied automatically to all employees. If your actual costs are higher, you can claim the real amount instead.
Common deductions for expats:
- Home office: €6 per day, up to €1,260 per year, with no dedicated room required.
- Commuting: 38 cents per kilometer from the first kilometer in 2026.
- Relocation costs: If you moved to Germany for work, these may be deductible.
- German language courses: Deductible if taken to improve your professional situation.
- Health and pension contributions: Fully or partly deductible as Sonderausgaben (special expenses).
Other German Taxes
As well as income tax and social security contributions, there are several other taxes in Germany you should know about.
What is the Church Tax in Germany?
Church tax (Kirchensteuer) is paid by registered members of Christian or Jewish congregations in Germany. Like income tax, it is deducted directly from your gross wage. Members are taxed at 8% to 9% of their income tax liability, depending on their state. It is 8% in Bavaria and Baden-Württemberg, and 9% everywhere else. If you are not religious or do not want to pay it, you can formally deregister (Kirchenaustritt) at your local Standesamt or Amtsgericht.
This way, religious institutions get funding directly from their members, which the state collects on their behalf.
What Is Solidarity Tax in Germany?
This tax was introduced in 1991 to rebuild and invest in Eastern Germany after reunification. It stays in place to help finance the ongoing costs of a unified Germany. In 2021, the solidarity surcharge (Solidaritätszuschlag) was abolished for most taxpayers after 30 years. Only those above the annual exemption limit (Freigrenze) still pay it.
In 2026, singles do not pay Soli unless their annual income tax bill exceeds €20,350, which affects roughly the top 10% of earners. So if you earn above this level, you must pay the solidarity surcharge.
What Is Corporation Tax?
Corporation tax in Germany is charged on the profits of companies operating in the country. The standard rate is 15%, plus a 5.5% solidarity surcharge on the corporation tax. Companies also pay a municipal trade tax, which varies between 7% and 17% depending on location.
How Much Is VAT in Germany?
Value-added tax, or VAT (Mehrwertsteuer), is charged on most goods and services in Germany. The standard VAT rate is 19%. Some items, such as books, food, and flowers, have a reduced VAT rate of 7%.
Seconded Employees in Germany
What should you consider when working as a seconded employee? Many people move to Germany for work because they are seconded, either at their own request or their employer's. A seconded worker stays employed by the same company. This means they remain on the payroll of their home country and keep paying taxes there.
As a result, they do not need to pay tax in Germany. Those paid by their employer in the country where they pay tax are also not required to make social security contributions in Germany. This applies across all EEA countries, and many other countries have similar bilateral agreements with Germany. The secondment rule usually applies to secondments of up to two years, though it can extend to five years.
Private Health Insurance
Seconded employees are advised to take out Private Health Insurance. EU citizens can access some basic medical care with their EHIC (European Health Insurance Card). Learn more about Private Health Insurance in Germany.
German Tax System: Frequently Asked Questions
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