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Taxes

Taxes

Taxes in Germany

Income taxes in Germany are based on a progressive tax system, meaning that the rate of taxation increases as income increases. Here are the key aspects:

  • Tax Classes (Steuerklassen): Germany has different tax classes for individuals depending on their marital status and other factors. For singles, the relevant tax class is usually Class I. Married couples can choose between Class III (one partner earning significantly more) and Class IV (both partners earning roughly the same). Class V is for the lower-earning spouse if Class III is chosen. Class VI is for secondary employment.
  • Basic Allowance (Grundfreibetrag): In 2024, the basic tax-free allowance is €11,604 for single individuals. This means that any income up to this amount is tax-free.
  • Progressive Tax Rates: The income tax rate starts at 14% and gradually increases to a maximum of 45% for very high incomes. The top tax rate applies to income over €277,826 for single filers and €555,652 for married couples filing jointly.
  • Solidarity Surcharge (Solidaritätszuschlag): This is an additional tax, currently at 5.5% of the income tax, but it is not applied if the income is below a certain threshold.
  • Church Tax (Kirchensteuer): Members of certain religious communities pay an additional 8% or 9% of their income tax as church tax.
  • Deductions: Various deductions are available, such as for professional expenses, special expenses (Sonderausgaben), and extraordinary burdens (außergewöhnliche Belastungen).
  • Tax Returns (Steuererklärung): Filing an annual tax return can lead to a tax refund, especially if you have deductible expenses or special circumstances.
  • Family Benefits: Families benefit from various tax allowances, like the child allowance (Kinderfreibetrag) and parental benefits (Elterngeld), which can significantly reduce the tax burden.
  • Non-Resident Taxation: Non-residents are taxed only on their German-sourced income, but at slightly different rates.
  • Joint Filing for Married Couples: Married couples have the option to file taxes jointly, which often results in a lower combined tax rate due to the splitting of income.

Your actual tax rate depends on various factors, including your total income, deductions, and tax class. It’s always advisable to use a tax calculator or consult a tax professional to understand your tax obligations in Germany.

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