Individual Income Taxes

For 2022 a taxable income of less than €9,984 was tax-free for a single person (€19,968) for a married couple). Incomes up to €55,960 for a single person (€119,220 for a couple) were then taxed with a rate progressively increasing from 14% to 42%. Incomes from €58,597 (€117,194) up to €277,825 (€555,650) were taxed at 42%. Incomes over €277,826 for a singe person and €555,652 for a married couple were taxed at 45%.

For 2023 the taxable income amounts have increased a bit. Taxable income of less than €10,908 is tax-free for a single person (€21,816 for a married couple). Incomes from €10,909 (€28,816) up to €62,809 (€125,618) are taxes at a rate of 14% to 42%; incomes from €68,810 (€125,620) to €277,825 (€555,650) are taxed at 42%. Incomes over €277,826 for a single person and €555,620 for a married couple are taxed at 45%.

In addition, for high earners, there is the “solidarity surcharge” of 5.5% of the tax, to cover the continuing costs of integrating the states of the former East Germany.

In 2021 the “solidarity surcharge” was eliminated for 90% of taxpayers and was reduced for another 6.5% depending on their earnings. The top 3.5% of earners will continue to pay the total surcharge.


As in many other countries, Germany allows a variety of deductions that can lower taxable income. Deductions are granted for circumstances such as children under 18 (or under 27 if still attending school and without earnings), specified insurance premiums, charitable and political contributions to German entities up to certain limits, and unavoidable extraordinary expenses above a specific limit (such as illness).

Deductions from compensation are also made for four social programs: retirement, unemployment, health insurance, and long-term nursing care. Payments for these programs are customarily borne equally by the employer and the employee. The employer’s share of contributions is not considered as taxable income to the employee, and the employee’s portion is tax deductible up to a specific limit. A tax adviser can tell you more about other deductions and the requirements to earn them.

For more information, go to our article on German Social Security and Employee Benefits.

Lohnsteuer and Einkommensteuer

If an individual is subject to German tax, generally, most sources of income are then taxable. The Lohnsteuer (wage tax), which accounts for a third of the German government’s revenue, is withheld at source from compensation. Income from other sources (e. g. self-employment, fees for services, rent collections, investments, and the like) are covered by the Einkommensteuer (income tax).

The Lohnsteuer differs from the Einkommensteuer only by the method of collection. The Lohnsteuer is collected at source and paid directly to the Finanzamt tax office) by the employer, while the individual must pay the Einkommensteuer himself.

Based primarily on your final payment for the previous year, the Finanzamt will estimate your tax for the current year and require you to make prepayments (Vorauszahlungen) of a quarter of the tax on March 10, June 10, September 10, and December 10. The total tax liability is determined by filing an income tax return, which includes all types of income from all sources. Wage tax withholding and provisional payments are deducted from this total tax liability so that a refund or final tax payment is assessed. The tax assessment is usually issued by the Finanzamt between two and six months from the date the return is filed. No payment will be due before receipt of the tax assessment notice.

Every tax return is under audit; therefore if the tax assessment is issued and is not preliminary, the assessment can only be changed in the future by the occurrence of extraordinary circumstances (e. g. tax evasion).

Tax Returns

You don’t necessarily need to file a tax return if your only source of income is your employee salary. This is because the Lohnsteuer is withheld from the salary. But, if you may be eligible for a tax refund or have other items that you may want to itemize (deductions or other income or benefits) or if you are self-employed, you need to file a tax return.

Every tax return is under audit; therefore if the tax assessment is issued and is not preliminary, the assessment can only be changed in the future by the occurrence of extraordinary circumstances (e. g. tax evasion).

As a rule, the income tax return (Einkommensteuererklärung) should be filed by July 31 of the year following the one in which the income was received. If you use the assistance of a tax consultant, your tax filing date is extended to December 31. In some circumstances, that date can be extended further to February 28. There may be penalties and interest assessed if the return is filed late.

There are a few situations where the taxpayer is required to pay taxes even though the income is less than the personal allowance, especially when tax-exempt income (such as foreign-sourced income) must be considered to determine the applicable income tax rate (progression clause). Taxes are then assessed based on a sliding scale.

An “unofficial” tax calculator available online can give you an idea of what your “wage tax” or Lohnsteuer might be. Click here for the calculator.

Other Taxes

In addition to the various types of income tax there is also a series of sales taxes that significantly impact individuals and businesses. The significant tax is the Mehrwertsteuer (Value Added Tax), which accounts for a quarter of the government’s revenue and is second only to the Lohnsteuer in this regard.

The Mehrwertsteuer assesses a levy on each step in the production and delivery of most items available for purchase. It applies to services and goods; the standard current rate is 19%. A reduced rate of 7% currently applies to certain products, including food and printed material. Medical and insurance services are generally exempt, as are exports of goods abroad and services rendered abroad.

Numerous other items, including gasoline, alcoholic beverages, tobacco products, tea and coffee, carry sales taxes in addition to the Mehrwertsteuer. There is also a church tax (Kirchensteuer), of 8% to 9% of the Einkommensteuer/Lohnsteuer. But you are not required to pay the tax unless you wish to be officially affiliated with one of Germany’s established churches, usually Catholic or Protestant (Evangelisch).
All in all there are approximately 30 different types of taxes, including taxes on inheritances, real estate and motor vehicles. There is even a tax on the gross amounts received by the state-run lotteries, though the distributions to the lucky lottery winners are tax-free.

Getting Help/More Information in English

If you think you would be capable of filing your own German tax return you can find help on the internet. There are some sites that have downloadable, printable forms and even online programs and apps to help you file electronically via the internet. Many of them are in German, but there are some in English. Many offer helplines and assistance with the process.

The Finanzamt offers free advice and help at some of their offices and you can download a tool called ELSTER that allows you to submit your return via the internet.

Suppose your tax situation is more complex (multiple income sources, collecting various government benefits such as Kindergeld, running your own business, eligibility for many deductions, etc.). In that case, consider using a tax consultant (Steuerberater) to help you through the intricacies of filing returns and provide ease of mind during your stay abroad. The tax consultant can also submit the tax forms on your behalf.

If you are interested in further information in English about the German tax system, the Bundeszentralamt für Steuern has information on their website at this link.

German Tax Classes

The tax authorities typically assign employees of German companies a tax class according to various categories.

The “Tax Class” (Lohnsteuerklasse or Steuerklassen in German) is important in determining the amount of withholding (income) tax deducted from a salary as well as in determining the value of many social benefits for which the taxpayer may be eligible. A tax class may be assigned to an employee by the authorities based on marital status and other criteria. Sometimes a taxpayer can request to be placed in a particular class.

Class I – applies to single (unmarried) people; those living in a registered civil partnership; those who are divorced, widowed or married unless they fall under tax class II, III or IV.

Class II – applies to those who are a single parent and living alone with a child or children and are entitled to the child allowance (Kindergeld) and/or other government assistance.

Class III – applies, upon request, to married employees if both spouses live together in Germany and one spouse is the sole wage earner; or the other spouse earns a salary but chooses to be categorized under Class V. Also applies to widowed employees for the calendar year following the death of the spouse if both were employees and living together in Germany on the day the spouse died.

Class IV – applies to married workers who live together and have not selected Tax Class III or V for one of them.

Class V – applies to a taxpayer whose spouse is classified under Tax Class III.

Class VI is an optional class available to individuals who may have multiple jobs and earn money from other employment. The taxpayer may have more than one Lohnsteuerkarte resulting from the various jobs
There may be various family models and permutations of the tax classes. You should consult the tax office or a tax advisor to have the best classification.

Tax Information for the Self-employed

Most taxpayers are taxed on their source of income. A large majority of these people are “employees” and have their wage or salary taxes (Lohnsteuer) automatically withheld from their paychecks by their employer. (Deductions are also withheld for four social programs: retirement, unemployment, health insurance, and long-term nursing care.)

However, a large number of people who fall under the category of “self-employed” are also taxed on their source of income. Since they don’t receive regular paychecks, taxes (and any contributions to the social programs) are paid directly to the Finanzamt or the appropriate social program agency or government office. The tax paid by the self-employed to the Finanzamt is Einkommensteuer.

Many rules, regulations, and laws govern taxes for the self-employed.

Who is considered "self-employed"?

The “self-employed” cover the gamut of various work and professional categories, and for tax purposes, a determination must be made as to the exact classification of their work.

The primary categories of the "self-employed" include:

1) Free-professionals (Freiberufler) (sometimes referred to as “Liberal Professions”) are those who have academic training – lawyers, doctors, scientific/technical experts, pharmacists, accountants, tax and business consultants etc. This group also includes “freelancers” – writers, artists, performers, independent consultants etc.

2) Business people (Gewerbetreibender) are those who start or own a business (Gewerbe) that allows them to earn money through commercial activity. This can include traders; sales professionals; shop owners; publishers; those in the hospitality, tourism and gastronomy sectors; craftspeople, and others. Their business may range from solo-owned small companies to small partnership companies.

The local Tax Office (Finanzamt) decides which category a work activity falls under. Being a Gewerbetreibender or Freiberufler makes a difference not only in tax matters but in other formalities as well. It can have an impact on how a company or business entity should be structured.

It’s always a good idea to consult with a tax advisor (Steuerberater) or other outside experts before deciding how you would want your business to be structured once the Tax Office has determined the classification of your work.

(For more information about some of the non-tax formalities involved with being self-employed, you can read our article on Self-Employment in Germany.)

What taxes are important for the self-employed?

1) Income Tax (Einkommensteuer) – This is, of course, the most critical tax. It’s the tax on personal profit generated by your business after deductions for operating expenses and other allowed items. Being self-employed means you must submit tax declarations each year. After the first year or so, the Finanzamt will calculate a quarterly income tax pre-payment that you need to pay to be applied to successive years’ tax payments. (Sometimes, if the pre-payment is more than the tax bill for the year, you could be eligible for a refund.)

2) Value Added Tax (VAT) Mehrwertsteuer or Umsatzsteuer – This is payable when you sell goods or services. The current standard rate for most transactions is 19%, and the reduced rate is 7%. VAT has to be billed to all your customers in Germany and be clearly shown as a separate line item in your invoices.

Depending on the amount of business you are doing, a separate tax return for Umsatzsteuer may not be required or may have to be submitted quarterly, monthly, or annually.

3) Input Tax (Vorsteuer) – This is the amount of VAT you have to pay when you buy goods or services. It is stated as VAT (Mehrwertsteuer)on the invoice to you.

4) Trade Tax (Gewerbesteuer) – this is a quarterly tax paid to your local municipality.
These taxes are typically calculated when you complete and submit your tax return. The amounts of the taxes depend on your profit from each year.

There are many different regulations and rules from the government for entrepreneurs and the self-employed that are designed to make it easier to have a successful business.

For the self-employed to properly navigate the ins and outs of the accounting, reporting and other complexities of the tax regime, it is recommended that they get outside help.

Help is available from a Tax Advisor (Steuerberater) or by signing up with one of the many new and easily managed digital tax and accounting services available online.