Income tax

Income tax is the most important direct tax in Germany – it is levied on all income.

The 7 types of income:

• Employment (salary → withheld in advance as wage tax)
• Self-employment (freelancers)
• Trade or business
• Capital assets (interest, dividends → flat-rate withholding tax)
• Renting and leasing
• Agriculture and forestry
• Other income (pensions, private sales)

Tax rates 2026 (progressive):

• 0%: up to €12,348 (basic tax-free allowance)
• 14–24%: €12,349–17,799
• 24–42%: €17,800–69,878
• 42%: €69,879–277,825 (top tax rate)
• 45%: from €277,826 ("wealth tax rate")

Example (taxable income €50,000, single):

• Marginal tax rate: 39% (on the last euro)
• Average tax rate: ~25%
• Actual tax: approx. €12,500 (not €19,500 as it would be at 39% on everything!)

Revenue for the state:

• Income tax (incl. wage tax): over 350 billion euros per year
• Of which wage tax: ~250 bn (paid directly by the employer)
• Assessed income tax: ~100 bn (self-employed, landlords, etc.)

Joint assessment: married couples can be assessed jointly (spousal income splitting). With unequal incomes this often saves thousands of euros.