How income tax works in Germany
Germany income tax applies on a worldwide basis to residents. Employment income, business income, rental income and investment income can all be in scope, depending on the source and the taxpayer’s residence status.
Salaries are usually taxed through wage withholding by the employer. The 2026 income tax tariff starts at a EUR 12,348 basic allowance, then rises through linear progressive bands before reaching the 42% and 45% top brackets.
The solidarity surcharge still applies to income tax and corporation tax, while church tax can also apply in participating states. Payroll social security is separate from income tax and is usually withheld through payroll as well.
Income tax brackets in Germany
| Bracket | Rate | Notes |
|---|---|---|
| Up to EUR 12,348 | 0% | Basic allowance |
| EUR 12,349 to EUR 17,799 | 14% to 24% | Linear progression zone |
| EUR 17,800 to EUR 69,878 | 24% to 42% | Linear progression zone |
| EUR 69,879 to EUR 277,825 | 42% | Standard top bracket |
| EUR 277,826 and above | 45% | Highest marginal rate |
Tax rates at a glance
- Basic allowance
- EUR 12,3482026
- Entry rate
- 14%
- Top rate
- 45%
- Solidarity surcharge
- 5.5%
- Church tax
- 8% / 9%
- Employee pension, unemployment, health and care contributions
- Capped
Who benefits most
These profiles tend to benefit most when the rules match their real residence, payroll and business setup.
EmployeesExpatsContractorsHigh earnersCross-border workers
Watch out for
- Wage withholding does not always end the filing question. Self-employed people and many residents still file annual returns, and the usual deadline is 31 July of the following year.
- Social security matters a lot in Germany. For 2026, the pension and unemployment contribution base is EUR 101,400 and the health and long-term care base is EUR 69,750.
- Foreign employers, secondments and the economic-employer rule can still create German wage-tax withholding.
- Germany taxes resident individuals on worldwide income, so foreign dividends, interest and other gains can still matter even if the cash was earned abroad.
Frequently asked questions
Do expats pay income tax in Germany?
Yes, if they are tax resident or have German-source income. Most expats pay through wage withholding first and then an annual assessment if a return is required.
What is the top income tax rate in Germany?
The top marginal income tax rate is 45% in 2026, before solidarity surcharge and possible church tax.
Is salary taxed differently from business income?
Yes. Salary is usually withheld through payroll, while business and self-employed income is generally settled by assessment and advance payments.