Wage tax

Lohnsteuer (wage tax) is an advance payment on income tax that your employer withholds directly from your salary and pays to the tax office.

How does it work?

• Your employer calculates the wage tax based on your tax class and ELStAM (electronic wage tax deduction data)
• The tax is withheld monthly – you can see it on your payslip
• At the end of the year you can reclaim overpaid wage tax via your tax return

Wage tax by income (tax class I, 2025):

• €2,000 gross: approx. €116 wage tax
• €3,000 gross: approx. €336 wage tax
• €5,000 gross: approx. €951 wage tax
• €8,000 gross: approx. €2,050 wage tax

Revenue for the state: at over 250 billion euros per year, wage tax is Germany's largest single tax and accounts for approx. 26% of total tax revenue.

Difference between wage tax and income tax: wage tax IS income tax – just as a monthly advance payment. The final income tax is calculated via the tax return.