Income Tax Calculator for Germany
Gross/net calculator with employer’s contributions
After selecting the type of calculation (gross to net or net to gross) and entering a monthly or yearly amount along with the particular tax details, the wage calculator computes the corresponding wage for the specified period (monthly or yearly basis).
The taxes and deductions are calculated according to the income. The calculator also determines the employer’s contributions, which comprise pension insurance, unemployment insurance, health insurance and contributions for additional care provisions.
Tax classes in Germany
The tax class (also called tax category) affects the rate of income tax, solidarity surcharge and church tax. There are six tax classes in Germany.
- Tax class I applies to individuals who are unmarried or divorced, and also to married individuals whose spouse lives abroad, and to couples registered in a civil partnership. Married couples who are permanently separated, as well as widowed people, are also covered by tax class I.
- Tax class II considers an allowance for lone parents. This refers to persons who are unmarried and whose household includes at least one child (the child must be registered with the person in question in the primary or secondary residence, and the person must also have a children’s allowance or receive child benefit payments). Another requirement for classification according to tax class II is that the lone parent does not live in a cohabitation union or in a registered civil partnership.
- Tax class III encompasses married lone and dual earners, whose spouses are assigned to tax class V. Both spouses in the marriage must reside in Germany and must not permanently live separately. The following applies to income tax 2013 for widowed persons: if the spouse died after the end of 2011, the widow or widower can still be classified in the tax class III band. The married couple must have resided together in Germany until that time.
- Married dual earners can apply for the tax class IV. This is recommended if both partners have relatively similar net wages. Tax class IV applies to both spouses in that case. The requirement here is again that both earners reside in Germany and do not permanently live apart.
- Tax class IV with factoring refers to the same group of people as tax class IV, except that in the factoring alternative, the benefits of tax class splitting are already considered during the year.
- Should not each spouse be classified as belonging to tax class IV, one shall be assigned to tax class V, and the other to tax class III.
- Tax class VI applies to individuals with more than one employment position. The employer paying the lowest wages should deduct the income tax according to tax class VI.
Joint taxation is generally more favorable for married couples. However, since only the wages of a spouse are considered in the deduction of that individual’s income tax, the two salaries are not combined until the end of the year to yield the relevant yearly tax. Due to this procedure, it regularly happens that too much or too little tax is initially deducted. For the most accurately possible calculation of the correct tax due in a year, there are two possible tax class combinations for married couples: III & V and IV & IV. In addition, the so-called factor method is also available since 2010.
Combination of tax classes for married couples
What combination of tax classes is best for a married couple depends mainly on how much the partners earn. The selection of a combination must be requested from the tax office using an informal application.
- IV/IV combination: The typical legal situation is that both partners are classified according to tax class IV. However, the choice of a IV/IV combination is only beneficial if both partners earn roughly the same.
- III/V combination: This combination of tax classes is overall more favorable if one of the married partners earns considerably more than the other partner. In this case, the total amount of tax deductions adds up to roughly the joint yearly tax. However, the tax deductions are greater for the partner with the tax class V than for classification according to tax class III or IV. The reason for this is chiefly due to the absence of the basic allowance for the minimum subsistence level. However, to counteract this, the allowance is calculated at twice the amount for the partner with the tax class III. The combination of tax classes III and IV is based on a wage-earning ratio of 60:40. If this is not the case, payments for tax arrears could be demanded after the tax returns.
- IV/IV with factoring: Along with the two combinations previously described, a third alternative is available since 2010 – the combination of tax classes IV & IV with a factor.
Higher payments due to tax arrears are avoided by use of the factor method, that could be demanded using the IV/IV combination. Demands for payments for tax arrears often occur because the flat rates and allowances to which married persons are entitled are not considered until the final tax assessment. If the combination IV/IV with factoring is selected, the application of income tax deductions is based on the ratio of the two wages – i.e., the basic allowance and the lowering of the taxes resulting from the splitting of the spouses’ tax burden are already considered in the tax deductions. In this way, the monthly deduction of income tax most closely matches the final tax assessment.
The factor is calculated by the tax office using a complicated method.
The ratio of probable income tax (resulting from the splitting method) divided by the total tax amount for the two spouses (with tax class IV) yields the individual factor.
Allowance
The monthly tax deductions can be reduced by an allowance. Taxpayers do not have to wait until they are compensated for their expenditure after the tax returns are declared – i.e., the net wage that is paid monthly is automatically increased.
Costs for childcare can be entered as an allowance. Commuters can apply to have travel expenses for journeys to and from work recognized. Amounts upwards of €920 per year are regarded as a typical figure. Taxpayers exceeding this amount can have their expenditure classified as an allowance by the tax office due to “exceptional costs.”
Applications for an allowance can be submitted to the tax office until November 30 of each year. However, anyone who does not make such an application may have the costs reimbursed by the tax office at a later date by stating the incurred costs in the tax declaration.
The basic tax allowance is automatically considered by the wage calculator when calculating wages.
Childcare allowance
A childcare allowance is available in Germany – i.e., whoever has children receives a tax allowance for a specific amount of their income. The amount corresponds to that designated for the minimum subsistence of a child and is intended to ensure that the basic needs of the child, including education, are safeguarded. The childcare allowance and child benefit payments are calculated by the tax office in such a way that they are of most benefit for the taxpayer.
The allowance per year and child is 7,008 euros. In tax class II, an allowance for lone parents to the amount of 1,308 euros can also be applied for. However, this bonus is only available to lone parents who are also entitled to child benefit payments.
If the parents are not jointly considered in the tax calculations, each of them is entitled to one half of the allowance (tax class IV). This amount is then 3,504 euro per person. The total amount can also be allocated to one of the parents.
No childcare allowance is granted for the tax classes V and VI. This is because the partner of an earner with the tax class V (the partner has the tax class III) is allocated the full amount of the allowance for childcare.
Since the tax class VI only applies to taxpayers who have additional employment, no childcare allowance is provided in this case. The basic yearly allowance is also not granted. These allowance amounts are generally considered in the primary employment tax situation.
Earners with a high-income benefit most from the childcare allowance as the following applies: if the child benefit payments are greater than the tax benefits, the childcare allowance is not considered in the calculation of income tax. For this reason, childcare allowances are only of benefit as of wages of 50,000 euros a year.
Note, however, that childcare allowance is in principle deducted when calculating church tax and the solidarity surcharge.
Frequently asked questions
The income tax rate in Germany is progressive, ranging from 0% to 45%. The rates are applied to different income brackets, with higher rates applying to higher incomes.
Taxable income in Germany is calculated by subtracting various deductions and allowances from the gross income. Deductions can include social security contributions, health insurance, and other legitimate expenses.
As of my last update in September 2021, the income tax brackets for single taxpayers were as follows:
- Up to €9,744: 0%
- €9,745 to €57,918: 14% to 42%
- Over €57,918: 45%
Note that these rates might change, so it’s essential to check for any updates.
Yes, there are various tax allowances and credits in Germany, such as the basic tax allowance, child allowance, and special expenses deduction. These allowances can reduce the taxable income and, consequently, the amount of income tax owed.
The Solidarity Surcharge (Solidaritätszuschlag) is an additional tax imposed on income tax in Germany. It was introduced to help finance the costs of German reunification. As of my last update, the surcharge was 5.5% of the income tax amount.
Income tax returns can be filed online or on paper. The process involves providing details about your income, deductions, and other relevant financial information. The deadline for filing tax returns is typically May 31 of the following year.
Yes, certain work-related expenses can be deducted from your taxable income. These might include expenses for commuting, work equipment, and professional training, among others.
Yes, income from investments, such as dividends and capital gains, is generally subject to income tax in Germany.
Here you can find our capital gains calculator for Germany.
The “Steuerklasse” system is used to determine the amount of income tax withheld from an employee’s salary. Different tax classes exist based on marital status and other factors that impact tax liability.
Yes, if you fail to file your income tax return on time, you may face penalties and interest charges. It is essential to meet the deadlines to avoid these additional costs.
Remember that tax laws and regulations may change over time, so it’s crucial to stay up-to-date with the latest information or consult a tax professional for personalized advice.
