Are you wondering why your salary in Germany is significantly lower than the gross amount on your contract? Mandatory taxes, insurance contributions, and additional deductions can take a substantial part of your salary. How do you calculate net earnings in Germany and what exactly affects your payout? Check what costs are deducted from your salary, how tax classes work, and whether you can recover part of the tax you paid. This way you’ll avoid unpleasant surprises on payday.
Salary calculation in Germany. Gross vs. net – why does less arrive in your account than you have on your contract?
The amount you see on your employment contract in Germany is only the gross value. The actual payout to your account is always lower, and the difference can be substantial. Mandatory taxes and social insurance contributions are the main elements that reduce your salary. The amount of these deductions depends on several factors, such as tax class, marital status, number of children, or income level. Legal regulations also affect contribution amounts – for example, statutory health insurance in Germany is mandatory and contributions are calculated automatically.
Additionally, some employees are subject to solidarity surcharge or church tax, which further reduces net salary. For people who haven’t previously dealt with the German tax system, the first payout can be quite a surprise. Therefore, it’s worth analyzing beforehand how much you’ll actually receive net, rather than basing your financial plans on the gross amount from your contract.
Income tax in Germany – how much is it and what determines its amount? How does this relate to payout amounts in Germany?
The German tax system is based on progressive rates, which means the higher the earnings, the larger percentage of salary you must give to the tax authorities. Rates start at 14% and rise to even 45% for people with very high incomes. The amount of deducted sums is also influenced by tax class – single people pay more than spouses who can file jointly. You can’t forget about the tax-free allowance, which in 2025 amounts to 12,096 euros for single people and 24,192 euros for married couples.
Additionally, employees can use standard tax deductions that lower the tax base. Interestingly, income tax isn’t calculated immediately at a fixed rate – for many people, calculating salary in Germany requires considering variable salary components and various allowances that can affect the final net amount.
Tax classes (Steuerklasse) – how do they affect your payout and which should you choose?
Germany has six tax classes that directly impact net salary amounts.
- Steuerklasse I covers single people and is least favorable regarding tax amounts.
- People with children can use class II, which offers additional allowances.
- Steuerklasse III is assigned to married people whose spouse earns significantly less or doesn’t work – thanks to this, one person pays lower taxes.
- Steuerklasse IV – intended for marriages where both spouses earn similarly. Regarding tax burden, it resembles Steuerklasse I but allows for fair tax distribution between partners. Often applied by default if the marriage doesn’t choose III/V.
- Steuerklasse V – complement to Steuerklasse III. If one spouse chooses class III, the other automatically moves to class V, where taxes are higher than in IV. This division makes sense if one partner earns significantly more – otherwise it may prove unfavorable.
- Most unfavorable is class VI, applied to people working for more than one employer – in this case taxes are highest.
Social insurance contributions – how much do you actually give and what do you get from it?
Every employee in Germany is covered by the social insurance system, which means part of gross salary automatically goes to health, pension, and other social security contributions. Standard deductions include pension insurance (9.3%), health insurance (7.75%), unemployment insurance (1.2%), and care insurance (1.525%), and for childless people it’s increased by an additional 0.6 percentage points.
For the employee, this means total deductions can amount to about 20% of salary, and the employer pays another equal amount. Thanks to this, employees have guaranteed health benefits and the right to future pension. This system differs from many other countries because all contributions are automatically deducted from salary and don’t require additional formalities.
Additional deductions – solidarity surcharge, church tax, and other hidden fees
Besides basic taxes and contributions, some employees in Germany are subject to additional fees that further reduce net salary. The solidarity surcharge (Solidaritätszuschlag) is a fee that originally was meant to support rebuilding eastern Germany, but currently only applies to people with higher incomes (the threshold starts at income tax above about 17,543 € for singles or 35,086 € for couples per year – this refers to owed tax, not income!). It amounts to 5.5% of calculated income tax, which in practice can mean several hundred euros less per year in your account. The second important fee is church tax (Kirchensteuer), which amounts to 8-9% of income tax, depending on the federal state (importantly: people with very low incomes may benefit from reductions or exemption from paying this tax). People who declared membership in a religious community have it automatically deducted from their salary. It’s worth knowing that you can officially leave the church in Germany, which allows you to avoid this fee.
How to calculate net salary in Germany? Step-by-step guide
To know exactly how much you’ll receive net, it’s worth knowing the key salary components. Salary calculation in Germany starts with gross salary, from which income taxes, insurance contributions, and any other fees are then deducted. You can do this manually, but the simplest option is a salary calculator for Germany, which automatically calculates the exact net amount based on your data. It’s enough to provide gross salary amount, tax class, marital status, number of children, and the federal state where you work. This way you can avoid disappointment when the first payout turns out lower than you expected.
How to get back part of your tax? Ways to optimize and possible refunds
Every employee can apply for a tax refund if they incurred deductible expenses, had high costs related to commuting to work, or other costs that can be deducted from income. For this, you can use an appropriate tax app like Taxando, which offers simple, fast, and error-free tax return preparation. Remember – it’s not worth leaving this to the last minute, because many people recover even several thousand euros annually!
Maciej Wawrzyniak ist ein erfahrener Unternehmer, dessen Unternehmen jedes Jahr mehr als 40.000 Steuererklärungen erstellt. Als Mitbegründer von Taxando bringt er seine Erfahrungen und Kenntnisse in den Bereichen Finanzen, Marketing und Steuern in das Projekt ein.
Privat liebt Maciej sportliche Herausforderungen, spielt Gitarre und schwimmt gerne im See. Außerdem ist er stolzer Vater von drei Söhnen.
