Are you wondering why your salary in Germany is significantly lower than the gross amount on the contract? Mandatory taxes, insurance contributions, and additional deductions can take away a significant portion of the salary. How do you calculate the net salary in Germany and what exactly influences your payout? Check what costs are deducted from the salary, how tax classes work, and whether you can get back part of the tax paid. This way, you avoid unpleasant surprises on payday.
Salary calculation in Germany. Gross vs. Net – why is less deposited in the account than what you have in the contract?
The amount you see on your employment contract in Germany is only the gross value. The actual payout to the account is always lower, and the difference can be significant. Mandatory taxes and social insurance contributions are the main elements that reduce the 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 the contribution amounts – for example, the statutory health insurance is mandatory in Germany and contributions are calculated automatically.
Additionally, some employees are subject to the solidarity surcharge or church tax, which further lowers the net salary. For people who have not yet had contact with the German tax system, the first payout can be a big surprise. Therefore, it is worth analyzing beforehand how much you actually receive net, instead of basing your financial plans on the gross amount in the contract.
Income tax in Germany – how high is it and what determines its level? How does it relate to the payout amount in Germany?
The German tax system is based on progressive rates, which means that the higher the income, the larger the percentage of the salary that must be given to the tax authorities. The rates start at 14% and rise up to 45% for individuals with very high incomes. The amount of deducted amounts is also influenced by the tax class – singles pay more than married couples who can file jointly. One must not forget the basic allowance which is in 2025 12,096 euros for singles and 24,192 euros for couples .
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Additionally, employees can use lump-sum tax allowances that reduce the tax base. Interestingly, income tax is not immediately calculated at a fixed rate – for many people, salary calculation in Germany requires considering variable salary components and various allowances that can influence the final net amount.
Tax classes – how do they affect your payout and which one should you choose?
In Germany, there are six tax classes, which have a direct impact on the net salary amount.
- Tax class I includes singles and is the least favorable in terms of tax amount.
- People with children can use class II which offers additional allowances.
- Tax class III is intended for married people whose spouse earns significantly less or doesn’t work – one person pays lower taxes as a result.
- Tax class IV – for marriages where both spouses earn similarly. In terms of tax burden, it resembles tax class I, but allows for a fair tax distribution between partners. Often applied by default when the couple doesn’t opt for III/V.
- Tax class V – supplementary to tax class III. When one spouse chooses class III, the other automatically switches to class V, where taxes are higher than in IV. This division makes sense if one partner earns significantly more – otherwise, it may prove disadvantageous.
- The least favorable is class VI, applied for people working for more than one employer – in this case, the taxes are highest.
Social insurance contributions – how much do you actually give up and what do you gain from it?
Every employee in Germany is covered by the social insurance system, which means that part of the gross salary is automatically used for health, pension, and other social insurances. Standard deductions include pension insurance (9.3%), health insurance (7.75%), unemployment insurance (1.2%) as well as long-term care insurance (1.525%), and for the childless, it’s increased by an additional 0.6 percentage points.
For the employee, this means that the total value of deductions can amount to about 20% of the salary, and the employer pays the same amount again. As a result, employees have guaranteed health benefits as well as the right to future pensions. This system differs from many other countries because all contributions are automatically deducted from the salary and require no 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 the net salary. The solidarity surcharge is a fee originally intended to support the reconstruction of East Germany, but currently only applies to individuals with higher incomes (the threshold starts at an income tax above about €17,543 for singles or €35,086 for couples per year – it’s about the owed tax, not the income!). It amounts to 5.5% of the calculated income tax, which in practice can mean several hundred euros less per year in the account. The second important fee is the church tax, which amounts to 8-9% of the income tax , depending on the federal state (important: people with very low incomes can benefit from reductions or exemptions from this tax). Individuals who have declared their affiliation with a religious community have it automatically deducted from their salary. It’s important to know that you can officially leave the church in Germany, which avoids this fee.
How do you calculate the net salary in Germany? Step-by-step guide
To know exactly how much you receive net, you should know the most important salary components . Salary calculation in Germany starts with the gross salary, from which income tax, insurance contributions, and possible other fees are subtracted. You can do it manually, but the simplest option is a salary calculator for Germany, which automatically calculates the exact net amount based on your data. It is sufficient to provide the amount of gross salary, tax class, marital status, number of children, and the federal state in which you work. This way, you can avoid disappointments if the first payout turns out to be lower than you expected.
In certain industries, additional deductions apply. Workers in the construction, roofing, scaffolding, and landscaping sectors also pay the Winter Construction Levy. This levy amounts to between 1.6% and 2% of the gross wage, depending on the industry, and serves as a safeguard for the low-income winter months. The good news: This levy can be claimed as job-related expenses in the tax return, thus increasing the tax refund.
How do you get part of the tax back? Ways to optimize and possible refunds
Every employee can apply for a tax refund if they had job-related expenses, high commuting costs, or other expenses that can be deducted from income. For this, one can use an appropriate tax app like Taxando which offers easy, fast, and error-free creation of the tax return. Remember – it’s not worth putting it off until the last moment, because many people get several thousand euros back annually!
Maciej Wawrzyniak
In his private life, Maciej enjoys sporting challenges, playing the guitar, and swimming in the lake. He is also the proud father of three sons.
