How German payroll works
Every month your employer takes two kinds of deductions from your gross pay (Brutto) before paying you the net amount (Netto). The first is tax: wage tax (Lohnsteuer), the solidarity surcharge (Solidaritätszuschlag, usually called Soli) and, if you are a registered member of a church, church tax (Kirchensteuer). The second is your half of social insurance: pension, unemployment, health and long-term care. Your employer pays roughly the same amount again on top of your salary.
Wage tax is an advance payment on your annual income tax. Your employer works it out with the official formula of the Federal Ministry of Finance, using your tax class and the details stored for you by the tax office (ELStAM). After the year ends you can file a tax return and claim real costs such as commuting, a home office or moving for work. Many employees get money back. For some, such as couples in classes III and V, a return is compulsory.
| Income tax 2026 (section 32a EStG) | Taxable income, single | Rate |
|---|---|---|
| Basic allowance (Grundfreibetrag) | Up to €12,348 | 0% |
| First progressive zone | €12,349 to €17,799 | 14% rising to about 24% |
| Second progressive zone | €17,800 to €69,878 | about 24% rising to 42% |
| Top rate | €69,879 to €277,825 | 42% |
| Wealth tax rate (Reichensteuer) | From €277,826 | 45% |
Unlike the UK or the US, Germany has no fixed bands in the middle: the rate climbs smoothly on every extra euro between €12,349 and €69,878. For married couples taxed jointly, all limits double (splitting). The Soli of 5.5% of income tax is only charged once a single person's wage tax passes €20,350 a year (€40,700 for a couple), and it phases in at no more than 11.9% of the excess, so it no longer affects most employees.
Tax classes explained
| Class | Who it is for | What changes |
|---|---|---|
| I | Single, divorced, or married but living apart | Standard allowances |
| II | Single parent living with a child | Adds the single-parent relief of €4,260 |
| III | Married, the higher earner when the spouse is in class V or has no pay | Splitting: the tax is worked out as if you earned half, then doubled |
| IV | Married, both earning similar amounts | Same wage tax as class I |
| V | Married, the partner of someone in class III | No basic allowance, so tax starts almost at once |
| VI | A second job alongside your main one | No allowances at all (not in this calculator) |
The class only changes how much tax is held back each month. It does not change the income tax a married couple owes for the year, because the joint return (Zusammenveranlagung) settles that. Classes III and V put more of the couple's pay in the hands of the higher earner during the year, which also raises parental allowance and unemployment benefit for that person. IV/IV spreads the withholding more evenly. Enter your spouse's salary in class III, IV or V and the calculator estimates the joint bill and the likely refund or back payment. Couples can also choose IV with a factor (Faktorverfahren), which we do not model.
Social insurance explained
| Insurance, 2026 | Total rate | You pay | Ceiling per year |
|---|---|---|---|
| Pension (Rentenversicherung) | 18.6% | 9.3% | €101,400 |
| Unemployment (Arbeitslosenversicherung) | 2.6% | 1.3% | €101,400 |
| Health (Krankenversicherung) | 14.6% + fund's extra rate | 7.3% + half the extra | €69,750 |
| Long-term care (Pflegeversicherung) | 3.6% | 1.8%, 2.4% if childless | €69,750 |
Contributions are charged only up to the ceiling (Beitragsbemessungsgrenze). Since 2025 the same ceilings apply in the former East and West. Every health fund (Krankenkasse) sets its own extra rate (Zusatzbeitrag); the official average for 2026 is 2.9%, and the employer pays half of it. Enter your own fund's rate for an exact figure.
Care insurance has three twists. From age 23, people without children pay a surcharge of 0.6 points, all of it out of their own pocket. Parents with two or more children under 25 get 0.25 points off their share for each child from the second to the fifth. In Saxony, which kept a public holiday when care insurance was introduced, employees pay 2.3% instead of 1.8% and employers only 1.3%.
Minijobs and Midijobs (low monthly pay) follow special contribution rules and are outside this calculator, as are company pensions, benefits in kind and a second job in class VI.
Worked example: €60,000 in Berlin
A single employee in class I, no children, not a church member, statutory health insurance with a 2.9% extra rate, earning €60,000 a year.
- Social insurance: pension 9.3% = €5,580; unemployment 1.3% = €780; health 7.3% + 1.45% = 8.75% = €5,250; care 1.8% + 0.6% childless surcharge = 2.4% = €1,440. Total €13,050.
- Allowances in the wage tax formula: employee allowance €1,230, special expenses allowance €36, and the insurance allowance (Vorsorgepauschale): €5,580 for pension plus 10.85% for health and care (7.0% + 1.45% + 2.4%) = €6,510, so €12,090.
- Taxable income: €60,000 − €1,230 − €36 − €12,090 = €46,644.
- Income tax: z = (46,644 − 17,799) / 10,000 = 2.8845, and (173.10 × 2.8845 + 2,397) × 2.8845 + 1,034.87 = €9,389.27, rounded down to €9,389. That matches the BMF test table for €60,000 in class I.
- Soli: €9,389 is below €20,350, so zero.
- Net pay: €60,000 − €9,389 − €13,050 = €37,561 a year, €3,130.08 a month.
As a church member in Berlin the same person would also pay 9% of €9,389 = €845.01 a year. Note that the formula uses 7.0% for health rather than 7.3%: the part of the rate that funds sick pay is not tax deductible.
What expats should know
Church tax starts with a tick box. When you register your address (Anmeldung), the form asks for your religion. If you enter Catholic or Protestant, church tax of 9% of your income tax (8% in Bavaria and Baden-Württemberg) is deducted from your pay. If you were baptized but no longer consider yourself a member, you can formally leave (Kirchenaustritt) at the registry office or local court for a small fee, and church tax then stops.
Private health insurance is not open to everyone. As an employee you can usually only leave the statutory system if you earn more than €77,400 a year (2026). Private premiums depend on age and health, not income, and your employer pays half, up to the amount it would pay for a statutory member. Returning to statutory insurance later is difficult, especially after 55, so compare carefully. In this calculator we treat your whole premium as basic cover for the tax allowance; in practice a small part (for example a single room in hospital) is not deductible.
There is no 30% ruling. The Netherlands exempts part of a skilled migrant's salary from tax. Germany has no such scheme for employees: you pay the same tax and contributions as everyone else from day one. What you can do is claim moving costs, a second household or language courses in your tax return.
Child benefit is paid separately. Kindergeld of €259 per child per month (2026) comes from the Familienkasse, not through payroll, so it is not in the net figure above. The child allowance (Kinderfreibetrag) of €9,756 per child only reduces Soli and church tax in payroll; the tax office checks at year end whether the allowance is worth more to you than the benefit.
Pension contributions are not lost if you leave. Within the EU, and with countries that have a social security agreement, your German periods count toward a pension there. Some nationals leaving for a country without an agreement can have their own contributions refunded after a waiting period.