FAQ
The German Income Tax Act lists seven types of income from the following sources:
Income that cannot be attributed to any of the above types of income (e.g. a lottery win) is not liable for income tax.
From your income subject to taxation you may deduct any expenses incurred in connection with achieving that income (income-related expenses or business expenses). For income from employment, these can include e.g. application expenses, travel expenses and relocation costs, the lump sum for travelling between one’s home and place of work or expenses for maintaining two households.
In addition, certain costs incurred for private purposes may be deducted.
Special expenses include, for example, private insurance for basic health care and compulsory long-term care and other private insurance premiums, childcare expenses, school fees, donations to charity, church tax paid, maintenance payments to divorced spouses, etc.
Extraordinary financial burdens include any major expenditure incurred for legal, moral or factual reasons (for example, as a result of ill health).
In addition, maintenance paid to persons entitled to maintenance and expenditure on vocational training for children may be deducted.
People with disabilities are entitled to deduct certain higher expenditure resulting directly from their disability. This may be either deducted as a lump-sum disability allowance or – based on evidence provided – the actual expenses incurred.
In addition, tax relief is granted for expenditure on employment or services in or around the household and craftsmen services.
Income tax is paid only from a certain level of taxable income (i.e., income subject to taxation for the calendar year minus any expenses and allowances). There is a basic personal allowance, which guarantees that the minimum subsistence level remains tax-free. This is determined by the German Federal Parliament and the amount changes every year. The threshold is doubled for married couples who are joint filers.
The basic personal allowance for a particular year and other important changes to German tax law can be found online at "Wissenswert"Opens in a new window (in German).
Under German income tax law, the higher a taxpayer’s taxable income, the higher the income tax rate they pay. The exact amount of tax depends on your personal tax rate, which is based on your taxable income and family status. The basic tax rate is 14% and increases progressively to 42% (the top rate). The maximum tax rate is 45%.
A separate tax schedule applies to income from capital assets:
All income from capital assets generated by private individuals’ investments, such as dividends and interest, but also profits on the sale of securities and futures is taxed uniformly at 25% of the income (plus solidarity surcharge and church tax as applicable). In this case, only the standard savers’ allowance may be deducted, deducting actual expenses incurred as income-related expenses is not allowed.
You can determine your expected tax burden with the wage and income tax calculatorOpens in a new window of the Federal Ministry of Finance (in German).
Further to income tax, there is solidarity surcharge as well as church tax (if you are a member of a religious community requiring the withholding of church tax). Solidarity surcharge is levied only from a certain level of taxable income and at a rate of 5.5% of the applicable income tax assessed as due. Church tax is levied at a rate of 9%.
