- Introduction
- What is a gross salary (Bruttolohn/Bruttogehalt)?
- What is a net salary (Nettolohn/Nettogehalt)?
- What progressive taxation means?
- What social security contributions are deducted in Germany?
- How much is deducted from social security contributions in Germany?
- How much income tax do I need to pay In Germany?
- In which tax class do I belong in Germany?
- How the tax category influences my net salary in Germany?
- We just got married, can we save tax with a tax class combination of 3/5?
- What are the tax rates in Germany?
- Do I need to pay church tax in Germany?
- How can I leave the church in Germany?
- How can I check my net salary calculation?
- What should I do if I think my net salary calculation is incorrect?
Introduction
In Germany, estimating how much of your gross salary remains after taxes and social security contributions is difficult. This article explains in detail how to calculate your net salary from your gross salary. Below, we'll go over some terminology and frequently asked questions.
What is a gross salary (Bruttolohn/Bruttogehalt) ?
The gross salary is the amount of money that an employee earns before taxes and social security contributions have been deducted. It is used as a baseline to calculate taxes and social security contributions.
There are a few things that can go into your gross salary in Germany. The gross salary includes your base salary (this amount is normally specified in your contract), any bonuses or commissions you may have earned, and any other forms of compensation you receive from your job. Once your gross salary has been calculated, your employer will then use this amount to calculate and deduct taxes and social security contributions from this amount.
What is a net salary (Nettolohn/Nettogehalt) ?
After the taxes and social security contributions have been deducted from your gross salary or Bruttogehalt , what remains is called net salary or Nettogehalt . This is the amount of money you take home every month after all deductions have been made.
What progressive taxation means?
The tax system in Germany is progressive, which means that employees who earn more money pay a higher percentage of their income in taxes than those who earn less money. As of 2023, the tax rates range from 0% for low incomes up to 45% for high incomes.
What social security contributions are deducted in Germany?
In Germany, all full-time employees have to pay social security contributions, which are
- pension insurance,
- unemployment insurance,
- health care insurance,
- and long-term care insurance.
How much is deducted from social security contributions in Germany?
In Germany, all full-time employees have to pay social security contributions. The social insurance contributions are divided between employee and employer. The amount to be paid towards social security contributions for both employees and employers is determined based on the gross salary. The employee's social contribution is deducted from the gross salary, whereas the employer's social contribution is an extra cost on top of the gross salary.
| Social Security | Rate | Maximum |
|---|---|---|
| Pension insurance | 9.30 % | €678.90 |
| Unemployment insurance | 1.30 % | 94.90 |
| Health care insurance | 7.30 % to ~8 % | ~€403.99 |
| Long term care insurance | 1.525 % to 2.375 % |
€76.60
€118.45 |
For "midi-jobbers", who are earning between €520 and €2,000, the social security contributions are varying between 0% and the flat rate ( § 20 ).
How much income tax do I need to pay In Germany?
The amount of tax you pay will depend on several factors, including your income level, whether you are married or single, do you belong to any tax-collecting religious communities, in which federal state you live etc. In general, the higher your income, the higher your tax burden.
Our German salary calculator gives you a detailed picture of how much income tax and social security contributions you need to pay.
In which tax class do I belong in Germany?
There are seven tax classes in Germany:
Tax class I (1)
This applies to singles - unmarried, separated or divorced employees.
Tax class II (2)
Applicable for single parents. Slightly less tax is due here. Single parents are entitled to the tax relief amount of €4,260 per year. For each additional child, this amount increases by €240.
Tax class III (3)
For married couples. Tax class 3 is reserved for married persons who are the sole wage earner or whose spouse belongs to tax class 5. As a rule, this tax class combination is chosen when one partner earns significantly more than the other. In this case, the higher-earning partner applies for tax class 3, while the partner with the lower gross salary chooses tax class 5.
Employees in tax class 3 can use the highest tax-free allowances ( 2 x €10,908 ) of all tax classes and thus have the lowest deductions. The net salary is therefore particularly high. In return, however, the spouse who is assigned to tax class 5 cannot use any tax-free allowances. His deductions are accordingly high, which results in a lower net salary.
Married couples who select tax class 3 for the higher-earning partner may benefit from a higher monthly net salary. However, because the partners are required to file a joint tax return at the end of the year, this tax class combination does not result in tax savings.
During the annual income tax adjustment, both salaries are added together and the income tax is calculated on this basis. The difference in tax paid during the year as a result of the tax class combination 3/5 is due as an additional payment.
Tax class IV (4)
For married couples. Married couples are automatically assigned to tax class IV (4) after getting married. Tax class IV (4) has the same deductions as tax class I (1). This is recommended if both spouses have comparable incomes.
Tax class IV (4) with a factor
For married couples. Here the monthly tax burden is only divided somewhat more "fairly" than in the III/V combination. The factor is determined by the Finanzamt based on the married couples' expected gross income.
Tax class V (5)
For married couples. This applies to the combination of tax class III (3) . Shall be chosen for the spouse with a significantly lower income.
Tax class VI (6)
For employees who have more than one job. Compared to the other tax classes, this class has the highest tax rate.
How the tax category influences my net salary in Germany?
The choice of tax class is only important for withholding tax, and therefore for immediate disposable income. The choice of tax class does not affect the final due income tax.
Examples:
- if you and your spouse both received wages and one of you was taxed in tax class 5 or 6, or you have tax class 4 with a factor. In this case, you might be paying too much tax and it might be worth submitting a tax return.
- See the description in tax class III (3) as a second example.
The only difference is tax class II (2) where the single parents are entitled to the tax relief amount of €4,260 per year. For each additional child, this amount increases by €240.
We just got married, can we save tax with a tax class combination of 3/5?
In short: No!
Employees in tax class 3 can use the highest tax-free allowances ( 2 x €10,908 ) of all tax classes and thus have the lowest deductions. The net salary is therefore particularly high. In return, however, the spouse who is assigned to tax class 5 cannot use any tax-free allowances. His deductions are accordingly high, which results in a lower net salary.
Married couples who select tax class 3 for the higher-earning partner may benefit from a higher monthly net salary. However, because the partners are required to file a joint tax return at the end of the year, this tax class combination does not result in tax savings.
During the annual income tax adjustment, both salaries are added together and the income tax is calculated on this basis. The difference in tax paid during the year as a result of the tax class combination 3/5 is due as an additional payment.
What are the tax rates in Germany?
The tax system in Germany is progressive, which means that employees who earn more money pay a higher percentage of their income in taxes than those who earn less money. The tax rates range from 0% for low incomes up to 45% for high incomes.
Do I need to pay church tax in Germany?
The church tax is not mandatory. You can leave the church at any time without providing a reason, see the steps at How can I leave the church in Germany? .
How can I leave the church in Germany?
In Germany, you must notify a state authority if you want to leave the church. These are the steps:
- go to either the Standesamt (parish registry office) or the Amtsgericht (county court),
- pay the exit fee, which is varying from state to state, but mainly it is around €30 ,
- present first provide a valid ID card or passport,
- fill out and sign the form.
How can I check my net salary calculation?
You can check your net salary calculation by using our salary calculator for Germany or by contacting your employer or payroll department.
What should I do if I think my net salary calculation is incorrect?
If you think your net salary calculation is incorrect, you should contact your employer or payroll department to get clarification and if it is needed have them correct it.
If you have further questions feel free to contact us.