German income tax basics for employees

Germany taxes income progressively. In 2026 the first 12,348 euros of taxable income per year are tax-free (basic allowance, Grundfreibetrag). Above that, the rate rises gradually from 14 % to 42 %; the 42 % rate starts at a taxable income of 69,879 euros, and a top rate of 45 % applies from 277,826 euros (2026 figures for a single person). These are marginal rates: they apply only to the part of income in each band, so your average rate is always lower.

For married couples and registered partners who are assessed jointly, the tax is calculated with income splitting (Ehegattensplitting): the tax on half of the combined income is doubled. This helps most when the partners earn very different amounts.

Taxable income is not the same as gross pay. Payroll automatically deducts some flat-rate allowances before applying the tariff:

• Employee allowance (Arbeitnehmer-Pauschbetrag): 1,230 euros per year for work-related expenses. If your real expenses are higher, you can claim them in a tax return.
• Special expenses allowance (Sonderausgaben-Pauschbetrag): 36 euros per year (72 euros for couples assessed jointly).
• A flat-rate allowance for your own social insurance contributions (Vorsorgepauschale).
• Single-parent relief (Entlastungsbetrag für Alleinerziehende) in tax class II: 4,260 euros per year for the first child, plus 240 euros for each additional child.

For a quick estimate of your monthly net pay, use the official wage tax calculator of the Federal Ministry of Finance.

Your tax class is set automatically from the data in the population register (marital status, children) and stored as part of your electronic wage tax data (ELStAM), which your employer retrieves using your tax ID.

• Class I: single, divorced or permanently separated people, and married people whose spouse does not live in Germany (special rules can apply to spouses living in another EU/EEA country).
• Class II: single parents who qualify for the single-parent relief because a child lives in their household.
• Class III: a married person or registered partner whose spouse is in class V, or who has chosen class III while the spouse earns little or nothing. Very low withholding.
• Class IV: married couples or registered partners who both live in Germany and are not permanently separated. This is the standard combination (IV/IV) after marriage.
• Class V: the partner of someone in class III. High withholding, because the allowances are concentrated in class III.
• Class VI: for a second or further job held at the same time as a main job. No allowances apply, so withholding is high.

If your employer cannot retrieve your tax data because you have not provided your tax ID through your own fault, it must apply class VI. If you do not have the ID yet through no fault of your own (for example because the letter has not arrived), the employer may use the expected tax class for up to three months. Give your employer the tax ID as soon as the letter arrives; too much tax withheld in the meantime is corrected through later payroll or your tax return.

Couples in which both partners are employees can choose between three combinations:

• IV/IV: both partners have similar withholding. Works well when incomes are similar.
• III/V: the higher earner pays much less wage tax during the year and the lower earner much more. The total withheld often does not match the final tax, so additional payments after the tax return are common.
• IV/IV with factor (Faktorverfahren): the tax office calculates a factor so that the splitting advantage is shared according to each partner's income. Withholding is closer to the final tax. A factor can be applied for for up to two years at a time.

You can apply to change the combination at your tax office, usually jointly and online through ELSTER. A change takes effect from the start of the month after the application, and to count for the current year the application must be made by 30 November. Couples in III/V or IV with factor are generally obliged to file a tax return.

The tax class also affects net pay used to calculate benefits such as parental allowance, unemployment benefit and sickness benefit. If you expect such a benefit, check the effect before choosing a combination.

Status of the reform (checked October 2026): a 2024 government bill planned to merge classes III and V into the factor method from 2030, but that part was dropped before the law was passed in December 2024. As of October 2026, classes III and V still exist in the Income Tax Act (§ 38b EStG) and no law abolishing them has been passed. Check the official sources linked below if you read about new reform plans.

A German payslip (Gehaltsabrechnung) typically shows:

• Wage tax (Lohnsteuer), based on your tax class.
• Solidarity surcharge (Solidaritätszuschlag, often "SolZ"), see below.
• Church tax (Kirchensteuer, "KiSt"), only if you are a member of a church that levies it.
• Social insurance contributions: pension, unemployment, health and long-term care insurance. In 2026 the employee share is roughly a fifth of gross pay up to the contribution ceilings; see the guide on social security and pension for the exact rates.

Check the tax class and church tax entry on your first payslip. Mistakes are easier to fix early.

The solidarity surcharge is 5.5 % of your income tax, but since 2021 most employees pay none. In 2026 it is only due if your annual income tax exceeds 20,350 euros (40,700 euros for couples assessed jointly or in tax class III). Just above that threshold a mitigation zone applies: the surcharge is limited to 11.9 % of the amount by which your tax exceeds the threshold, so it phases in gradually.

If you are a member of the Protestant (Evangelical) Church, the Roman Catholic Church or the Old Catholic Church, church tax is collected by the tax office together with wage tax. In Berlin it is 9 % of your wage or income tax; in Bavaria and Baden-Württemberg it is 8 %, in all other states 9 %. Church membership is part of the data held by the registration office (a church exit, for example, is reported to it by the court), and from there it reaches your electronic wage tax data. If you are asked about your religion when you register, answer accurately.

If you want to leave a church that levies church tax, you must declare this in person at the local court (Amtsgericht) responsible for your address, or in writing with a notarised signature. In Berlin the fee is 30 euros (2026), payable in advance, and you need your passport or ID card with your registration certificate. The exit is effective at the end of the day you sign; church tax ends at the end of that month. Most courts require an appointment. An online exit is not possible; Berlin police warn against websites that offer one for a fee.

For children, families receive child benefit (Kindergeld) of 259 euros per child per month in 2026, or the tax office applies the child allowances (Kinderfreibeträge) of 9,756 euros per child per year in 2026 if that is more favourable; the tax office checks this automatically in the tax return. In monthly payroll, the child allowances do not reduce wage tax, but they do reduce the solidarity surcharge and church tax.

After the end of the year, or when you leave a job, your employer closes your payroll account and sends an electronic wage tax certificate (elektronische Lohnsteuerbescheinigung) to the tax office, by the last day of February of the following year. It shows your gross pay, the wage tax, solidarity surcharge and church tax withheld, and your social insurance contributions. You receive a printout or an electronic copy.

Keep it: the figures are already transmitted to the tax office and appear pre-filled in ELSTER, but you need the certificate to check them when you file a tax return.

Your tax office (Finanzamt) is determined by your home address. In Berlin, the Senate Department for Finance lists all tax offices and their responsibilities. Most contact with the tax office, including changing your tax class, applying for tax allowances and filing returns, can be done online through ELSTER once you have registered there.