United States vs Germany taxes (2026): income, CGT and social charges

United States vs Germany tax rates at a glance

Tax	🇺🇸 United States	🇩🇪 Germany
Income tax	Personal income tax: 10% - 37% Social Security: 6.2% Medicare: 1.45% Additional Medicare: 0.9% State income tax: Varies	Basic allowance: EUR 12,348 Entry rate: 14% Top rate: 45% Solidarity surcharge: 5.5% Church tax: 8% / 9% Employee pension, unemployment, health and care contributions: Capped
Corporate tax	C corporation tax: 21% CAMT: 15% Pass-through entities: Different State tax: Varies	Corporation tax: 15% Solidarity surcharge: 5.5% Trade tax base rate: 3.5% Trade tax effective range: 7% - 20.3% DMTT / Pillar Two: 15%
Capital gains tax	Long-term capital gains: 0% - 20% Short-term capital gains: 10% - 37% Qualified dividends: 0% - 20% NIIT: 3.8%	Securities gains tax: 25% Solidarity surcharge: 5.5% Church tax: 8% / 9% Saver allowance: EUR 1,000 / EUR 2,000 Private-sale holding period: 1 year / 10 years
Dividend tax	Qualified dividends: 0% - 20% Ordinary dividends: 10% - 37% NIIT: 3.8% State tax: Varies	Dividend withholding tax: 25% Solidarity surcharge: 5.5% Church tax: 8% / 9% Annual saver allowance: EUR 1,000 / EUR 2,000
Wealth tax	Net wealth tax: 0% Property tax: Varies Estate tax: Up to 40% Gift tax: Up to 40%	Net wealth tax: 0% Net worth tax: 0% Annual asset tax: 0%
Inheritance / estate tax	Federal inheritance tax: 0% Federal estate tax: Up to 40% Federal gift tax: Up to 40% Basic exclusion: $15,000,000	Tax class I: 7% - 30% Tax class II: 15% - 43% Tax class III: 30% - 50% Tax-free allowances: EUR 20,000 - EUR 500,000
VAT / GST / sales tax	Sales tax: Varies by state	VAT: 19% / 7%
Solidarity / extra charges	State income tax and payroll tax vary	5.5% solidarity surcharge on many liabilities, plus social security
Worldwide taxation	Citizens and resident aliens generally taxed worldwide	Residents taxed on worldwide income; non-residents on German-source income

Who wins on each tax

Personal income taxUnited States

The U.S. federal top ordinary rate is 37% before state tax; Germany reaches 45% and then adds solidarity surcharge, church tax and social charges.

Corporate taxUnited States

U.S. C corporations pay 21% federally plus possible state tax; Germany combines 15.825% corporation tax with local trade tax, often around 30% in total.

Capital gains taxUnited States

U.S. long-term gains generally use 0%, 15% or 20% federal rates, while German private investment gains commonly face 25% plus solidarity surcharge.

VAT / sales taxUnited States

The U.S. has no federal VAT, while Germany's standard VAT is 19% with a 7% reduced rate.

Inheritance taxTie

The U.S. federal estate tax can reach 40% after a large exemption; German inheritance tax ranges from 7% to 50% depending on relationship and value.

The verdict

The United States usually wins the rate table. Federal ordinary income tax tops at 37%, long-term capital gains are often 0% to 20%, and C corporations pay 21% federally. Germany's personal scale reaches 45%, investment income is commonly 25% plus the 5.5% solidarity surcharge, and companies typically sit near 30% once trade tax is included.

The comparison is not a clean federal-versus-federal story. A U.S. citizen or green-card holder remains on the U.S. worldwide system after a move to Berlin or Munich. Germany then adds wage-tax withholding, payroll social security of about 20% for employees, church tax in participating states, and the solidarity surcharge on many income-tax and corporation-tax liabilities.

Choose the United States when U.S. customers, fundraising or a low-tax state is the real plan. Choose Germany when the EU market, German employment or family life is the point. Do not treat a German assignment as a U.S. tax exit.

How to read this comparison

Germany is a high-compliance social-state tax system. The United States is a layered federal-and-state system that follows its citizens. That is the comparison that matters, not a one-line rate contest.

U.S. ordinary federal rates run from 10% to 37%. Long-term capital gains and qualified dividends can use 0%, 15% or 20%, and high earners can also owe 3.8% NIIT. There is no federal VAT and no federal net wealth tax. The federal estate tax can still reach 40%. Those federal numbers look competitive against Germany until you add a high-tax state, payroll taxes and the fact that a U.S. passport does not stop at the German border.

Germany taxes residents on worldwide income. The 2026 personal tariff is progressive from 0% to 45%, with a EUR 12,348 basic allowance. The 5.5% solidarity surcharge still attaches to many income-tax and corporation-tax bills, and church tax can apply in participating states. Employees also fund social security through payroll, commonly around 20% on the employee side before employer contributions. Private investment income is often collected as Abgeltungsteuer at 25% plus the surcharge, producing 26.375% in the ordinary case.

Companies are the other German weight. Corporation tax of 15% plus solidarity surcharge is only the federal slice. Local trade tax usually lifts the combined burden to about 30%. That is heavier than a 21% U.S. C corporation before state tax, and it is a poor match for a founder who expected “EU company, U.S. rates.”

VAT is 19% standard and 7% reduced. Inheritance and gift tax run from 7% to 50% by class of heir. There is no German net wealth tax, which is one of the few areas where Germany is not automatically harsher than a U.S. person with a large estate.

A move only works if you model both systems at once: U.S. citizenship or green-card status, German wage tax, social-security totalization, treaty residence and the state you are leaving. A German employment contract is not an expatriation plan.

Which one fits you

🇺🇸 Choose United States if you're a…

Founders raising U.S. capital
Investors who want preferential long-term federal gains rates
People who will remain U.S. persons anyway

🇩🇪 Choose Germany if you're a…

Employees whose career is genuinely German
Families who need EU residence more than a rate cut
Groups that must operate inside the German market

Frequently asked questions

Is the United States or Germany lower tax?

On federal headlines the United States is usually lighter. German social charges, solidarity surcharge and trade tax raise the German total, while U.S. state tax and citizenship-based filing can raise the American total.

Does moving to Germany stop U.S. tax?

No. U.S. citizens and many green-card holders remain taxable on worldwide income. German wage tax and social security then sit on top, with foreign-tax-credit and treaty work needed to limit double tax.

Does Germany have a wealth tax?

Germany currently has no net wealth tax. Inheritance and gift tax, real-estate transfer tax and local property charges still matter.