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Tax brackets

 

Note that this article is only relevant for you if your company is located in Germany. 🇩🇪

 

Please note that the content of our website (including any legal information) is intended solely for the purpose of providing non-binding information and does not constitute legal advice in the true sense of the term. The content of this information cannot and should not replace individual and binding legal advice that addresses your specific situation. In this respect, all information is provided without guarantee of correctness, completeness or of being up to date. 

 

What is a tax bracket?

The tax bracket determines the amount of tax deductions from the gross salary and is therefore relevant for all persons who are subject to income tax in Germany. By assigning individual tax brackets, the amount of wage-tax related deductions is determined for each employee.

Therefore, an employee's monthly net salary depends, among other things, on their current above-mentioned tax deduction characteristics. 

Tip:
The solidarity surcharge and the church tax are calculated from the amount of payable wage tax.

 

Overview of tax brackets and how they are assigned

An employee's tax bracket depends on their marital status and work situation. See the following table for an overview of the six possible tax brackets and their prerequisites.

 

Tax bracket Employees
I
  • Single employees, or
  • Divorced employees (only if they have no children), or
  • Widowed employees (after one year from the death of the spouse), or
  • Married employees, but only if
    ▶︎ the couple is permanently separated, or
    ▶︎ the spouse/registered partner is living abroad.
II

Single parents (see tax bracket I) with at least one child registered in their home. The employee receives an individual child allowance for their child.
III

Married employees/registered civil partnerships, if

  • the employee's salary is significantly higher than that of their spouse/registered partner and the spouse/registered partner has tax bracket V, or
  • the spouses/registered partners do not live permanently separated and the spouses/registered partners live in Germany.

Notes
▶︎ Under the above prerequisites, widowed employees can also fall into this tax class up to one year after their spouse's death.
▶︎ In the case of a marriage, both spouses are automatically assigned the tax class combination IV/IV. If the tax class combination III/IV is preferred, both spouses have to apply for it.
IV

Married employees/registered civil partnerships, if

  • both receive approximately the same wages, and
  • the spouses/registered partners do not live permanently separated and the spouses/registered partners live in Germany.
  • Additional option: Tax bracket IV with a factor (spouses/registered partners who have different income levels and the tax liability is divided equally between both spouses/registered partners).

Note
In the case of marriage , both spouses are automatically assigned the tax class combination IV/IV. The additional option tax class IV with factor has to be applied for by both spouses.
v

Married employees/registered civil partnerships, if

  • the employee's salary is significantly lower than that of their spouse/registered partner, and
  • the spouse/registered partner has tax bracket III.

Note
In the case of marriage, both spouses are automatically assigned the tax class combination IV/IV. If the tax class combination III/IV is preferred, both spouses have to apply for it.
VI
  • The employee holds multiple jobs at the same time, or
  • the tax ID is missing.

Note
Tax class VI is assigned for other additional employment relationships; any tax-free amounts are satisfied in tax class I for the main employment relationship.

 

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