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Income Tax in Germany: Tax Brackets and Rates Explained
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Income Tax in Germany: Tax Brackets and Rates Explained

Oliver Frankfurth
Oliver Frankfurth
March 2026
5 min

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Quick Summary

When you receive your first German payslip, the difference between your gross salary (Brutto) and net salary (Netto) can be a shock. A major part of this deduction is the Income Tax (Einkommensteuer). How much you pay depends entirely on your marital status and which of the 6 "Tax Brackets" (Steuerklasse) you are assigned to. This guide explains the system and how married couples can use it to increase their monthly cash flow.

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1. How the German Income Tax System Works

Germany uses a progressive tax system. This means the more you earn, the higher your tax rate.

  • The Basic Tax-Free Allowance (Grundfreibetrag): In 2024/2026, the first ~€11,604 you earn per year is completely tax-free. You only pay tax on the money you earn above this amount.
  • The Tax Rate: It starts at 14% (for the euro right above the basic allowance) and rises progressively to the top rate of 42% (which currently applies to income over approx. €66,761). There is also a "wealth tax" of 45% for extremely high earners.

To see exactly how much tax will be deducted from your specific salary, use our Net Salary Calculator.

2. The 6 Tax Brackets (Steuerklassen)

Your tax bracket (Lohnsteuerklasse) determines how much tax your employer withholds from your monthly paycheck.

It does not change your overall annual tax burden! It only changes your monthly cash flow. If your tax bracket results in too much tax being withheld, you will get it back when you file a tax return next year.

Tax Class 1 (The Default)

required

Applies to: Singles, divorced people, or married expats whose spouse still lives outside of the EU. This is the standard, baseline tax deduction.

Tax Class 2 (Single Parents)

optional

Applies to: Single parents who live alone with their child. It provides a financial relief via an additional tax-free allowance.

Tax Class 3 & 5 (The Married Split)

optional

Applies to: Married couples with a large income disparity. The higher earner takes Class 3 (very low taxes withheld), and the lower earner takes Class 5 (very high taxes withheld).

Tax Class 4 (Equal Married Couples)

optional

Applies to: Married couples where both partners earn roughly the same amount. The deductions are identical to Class 1. (This is the default if you get married in Germany).

Tax Class 6 (Second Jobs)

critical

Applies to: Your second or third job. Because your tax-free allowance is already used up by your first job, Class 6 has the highest immediate deductions (often around 50%).

3. Married Couples: How to optimize your taxes

If you are married and both living in Germany, the tax system allows for "Ehegattensplitting" (Income Splitting). This looks at your total combined household income, halves it, calculates the tax on that half, and doubles it. This is highly advantageous if one partner earns significantly more than the other.

The Class 3 / 5 Strategy

If Partner A earns €80,000 and Partner B earns €20,000, Partner A should switch to Tax Class 3, and Partner B to Tax Class 5.

  • Result: Partner A will take home significantly more money each month. Partner B will take home very little. However, the total household cash flow at the end of the month will be much higher than if both were in Class 4.

Mandatory Tax Return for 3/5

If you choose the 3/5 combination, you are legally required to file a tax return at the end of the year. The tax office wants to ensure you didn't underpay. Sometimes, this combination leads to you having to pay a small amount back to the tax office at the end of the year.

4. How to change your Tax Bracket

Did you get married? Did you have a child? You can apply to change your tax bracket.

  1. Download the form "Antrag auf Steuerklassenwechsel bei Ehegatten" (if married) from the ELSTER or Finanzamt website.
  2. Fill it out and have both spouses sign it.
  3. Send it to your local tax office (Finanzamt).
  4. Once processed, the tax office will electronically notify your employer, and your next payslip will reflect the new net amount.

(Note: The German government is currently debating abolishing the 3/5 combination in the coming years and replacing it with a fairer "Class 4 with Factor" system).

Frequently Asked Questions (FAQ)

Oliver Frankfurth

About Oliver

Founder of expats.de, former cooperative bank advisor (Bankfachwirt IHK) with 12 years of banking experience, and a §34d licensed insurance broker. Since 2014, Oliver has helped over 10,000 expats navigate the German financial system. Read Oliver's full story →

11 Years Market Leadership34d Licensed

Educational Notice & General Advice

This content is educational and reflects analysis based on our 11 years of market experience, our 200,000+ community insights, and current regulatory knowledge.

As a 34d-licensed insurance broker and experienced financial advisor, I provide this guidance in good faith. However, for personalized advice especially regarding insurance, mortgages, or tax-specific decisions—please consult with a qualified financial advisor or tax professional in your specific situation. Past expat experiences and historical market data do not guarantee identical results for your unique circumstances.