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Taxes in Germany

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With the largest European economy and sustaining one of the highest standards of living in the world, we have to wonder how the taxes in Germany fit into this picture. While they do comprise a pretty penny, if you look around German society you can rest assured that it is being put to good use. Read on to learn about German tax brackets, VAT, tax returns and more!

Taxes in Germany

German taxes will be a step into another dimension for many Americans. While Americans still pay a hefty amount in taxes, the German socialist society falls under its own category. This immediately brings up a slew of questions: How much is tax in Germany?’, ‘What are the tax brackets in Germany?‘, ‘Is there income tax in Germany, sales tax in Germany, or both?

To give you a brief introduction to German taxes, we get into all these questions (and more 😉) below!

German Tax Brackets

Income tax in Germany is definitely going to be a substantial part of your life. One of the big trade-offs when it comes to taxes in Germany vs USA is that you pay more to get more from the state. All that pristine infrastructure? Taxes. Public healthcare? Taxes. Low poverty? Taxes. You get the idea…

This means understanding the tax rates in Germany is a critical point of your financial planning. Taxes will be taken straight out of your paycheck. In contrast to the US, your marital status and combined income are the primary factors determining your German tax bracket, which we list below.

Single incomeJoint income
Tax RateAmount TaxedTax RateAmount Taxed
0%up to € 7,6640%up to € 15,330
15%€ 7,665 – € 52,51315%€ 15,331- € 104,304
42%€ 52,514 – € 250,00042%€ 104,305 – € 500,000
45%€ 250,000+45%€ 500,000+

SireloTip! Don’t forget, Uncle Sam still gets his cut! Because the US applies global taxation, your German income will be subject to US taxes too! Learn more about the implications this has for you.

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VAT in Germany

Most Americans are unfamiliar with the concept of Value Added Tax, or VAT. In short, it is the sales tax in Germany. This is a tax applied to the value of products and services exchanged in the local economy. While similar to sales tax, VAT is built into the consumer price, not applied at the register.

What is the VAT rate in Germany? 19% on most products. This is actually on the low side, as the UK has a VAT of 20% and the Netherlands 21%. On certain products (like books) German VAT drops to 7%.

round ball with german flag on it positioned next to large dollar sign

Tax Returns in Germany

Tax Day in Germany is May 31st, but the earlier you file the quicker you get that sweet return. Depending on your tax class, you will be obliged to pay more or less tax or get a bigger or smaller return. Below we list the various German tax classes:

  • Steuer Class 1: Income of € 17,300 or more
  • Steuer Class 2: Single parents entitled to tax relief
  • Steuer Class 3: Single income less than € 8,652, or joint income less than € 17,300
  • Steuer Class 4: Married and both partners split their income
  • Steuer Class 5: Married with a tax partner in the Steuer Class 3
  • Steuer Class 6: Workers with more than one job

If all this sounds confusing, it is because taxes in Germany are a complicated business. When Tax Day comes around you may want to consult an accountant who specializes in expats or utilize a German tax calculator.

Moving to Germany?

Planning a move to Germany? Then we can imagine that you will have plenty to arrange before packing up. Why not check out our full expat relocation guide for everything you need to know before moving to Das Land der Dichter und Denker? Or, check out the helpful articles linked below for further reading. Good luck!