Taxes

Taxes in Germany

Germany has a comprehensive tax system with income tax, social contributions, and various other levies. Understanding it is crucial for financial planning.

Income Tax (Einkommensteuer)

2026 Tax Brackets (Single):

Solidarity surcharge (Solidaritätszuschlag):

• 5.5% on tax amount
• Only applies above €17,543 annual tax (most people exempt now)

Church tax (Kirchensteuer):

• 8-9% of income tax (varies by state)
• OPTIONAL - only if registered with church
• Can opt out at Standesamt

Social Contributions

Mandatory for employees:

Calculation ceiling:

• Social contributions capped at certain income levels
• 2026: ~€90,000 for pension/unemployment, ~€69,000 for health

Tax Classes (Steuerklassen)

Critical for employees:

• Class I: Single, no children
• Class II: Single parent
• Class III: Married, spouse not working or low income
• Class IV: Married, both working (standard)
• Class V: Married, partner in Class III (higher withholding)
• Class VI: Second job

Impact: Affects monthly withholding, NOT final tax bill

Self-Employed Taxes

For freelancers (Freiberufler):

• Income tax: Progressive rates (0-45%)
• No trade tax (Gewerbesteuer)
• Voluntary pension insurance
• Full health insurance cost (€400-800/month)
• VAT/Sales tax: 19% (or exempt under €22,000 - Kleinunternehmer)

For businesses (Gewerbetreibender):

• Income tax + trade tax (~14-17% depending on municipality)
• Higher administrative burden

Deductions

Common deductions:

• Work-related expenses (Werbungskosten): €1,230 automatic
• Home office: €6/day up to €1,260/year
• Commute: €0.30/km one-way (Entfernungspauschale)
• Professional development, work equipment
• Childcare: €4,000/year per child under 14

Special expenses (Sonderausgaben):

• Pension contributions
• Charitable donations
• Professional association fees

Filing Taxes

Deadlines:

• July 31 following tax year (if filing yourself)
• February 28 (two years later) if using Steuerberater
• Extensions available

Who must file:

• Self-employed (always)
• Multiple income sources
• Married couples filing jointly
• High earners with deductions
• Anyone receiving pension + other income

Optional filing:

• Often worth it for refund (Durchschnittlich €1,095!)

Getting Help

DIY options:

• ELSTER (official free software - German only)
• SteuerGo, Taxfix, Wundertax (paid, English-friendly) €30-50

Steuerberater (Tax Advisor):

• Cost: €200-800 depending on complexity
• Worth it for: First year, freelancers, complex situations
• Can pay for themselves with optimizations

English-speaking Steuerberater:

• Available in major cities
• Essential for peace of mind

For Expats

First year considerations:

• Dual-status possible (resident/non-resident)
• Tax treaties prevent double taxation
• Foreign income reporting required if resident
• Keep records from home country

Common situations:

• Blue Card holder: Standard employee taxes
• Freelancer: Quarterly advance payments (Vorauszahlungen)
• Student part-time: Usually tax-free if under €11,604/year
• Researcher/academic: Sometimes special tax rates

Tax Benefits

Family-related:

• Child benefit (Kindergeld): €250/month per child
• OR child tax deduction: €6,384/year per child (whichever is better)

Married couples:

• Income splitting (Ehegattensplitting) can save significantly

Common Pitfalls

• Not updating Steuerklasse after marriage
• Forgetting home office or commute deductions
• Not filing when refund due
• Church tax auto-enrollment in some states
• Not tracking business expenses (self-employed)

Tips for Success

1. Hire Steuerberater first year - Pays for itself
2. Track all expenses - Keep receipts!
3. File even if not required - Average refund €1,095
4. Opt out of church tax - If not affiliated
5. Choose right Steuerklasse - Especially for married couples