The progressive curve
Income up to the basic allowance (Grundfreibetrag) is tax free. Above it, the rate starts at 14% and rises continuously to 42%. For very high incomes a top rate of 45% applies (the so-called rich tax). The thresholds are adjusted most years.
Marginal rate vs. average rate
The marginal rate is what you pay on the next euro. The average rate is your total tax divided by your income — always considerably lower. A salary in the 42% zone does not lose 42% of everything; only the part above the threshold is taxed at that rate.
The marginal rate is what matters for decisions: it tells you what a deduction saves and what a bonus really costs in tax.
Joint assessment for married couples
Married couples and registered partners can be assessed jointly (Ehegattensplitting). Their income is added, halved, taxed and doubled. When incomes differ significantly, this lowers the total tax — one of the reasons to review tax classes after marriage.
What comes on top
Income tax is only one deduction from your salary.
- Solidarity surcharge — only above a high income tax threshold.
- Church tax of 8 or 9% of income tax, if you are a registered member.
- Social security: pension, unemployment, health and long-term care insurance, shared with your employer up to the contribution ceilings.
Frequently asked
What is the income tax rate in Germany?
It is progressive: 0% up to the basic allowance, then rising from 14% to 42%, with a top rate of 45% for very high incomes.
Is capital income taxed at the same rate?
Usually not. Most investment income is taxed at a flat 25% plus surcharges, independent of your salary rate.
Why is my average tax rate lower than my bracket?
Because only the part of your income above each threshold is taxed at the higher rate. The average rate always stays below the marginal rate.
This guide is general information on German tax law, not advice on your individual case. Rules and figures change with each tax year.