Tax categories in Germany

The German tax law counts a total of 6 tax categories, before application of which factors whether one lives alone or is married, whether they raise or not a child or whether they do or do not have a side job are taken into account. It also matters which of them earns how much per month.
One of the most pressing issues for people moving to Germany is that, if they get employed, exactly how much of their gross salary remains in their hands, which greatly depends on the tax class the person falls into. However, during tax base calculation, the income amount is also of importance, Germany having a progressive tax system, meaning the more someone earns, the more there will be deducted from their salary, whereas, if the employee is registered with a low income, then only a minimal amount of tax is deducted from it.

Now, let’s look at the tax categories defined by the German tax and revenue office.

Steuerklasse [tax class] 1:

This includes single people, widows, divorcees, retirees, as well as people living in a partnership. This category also encompasses single parents, that are not entitled to family allowances, as well as such married couples, of which one of the spouses permanently lives abroad.

Steuerklasse [tax class] 2:

This is the category that includes parents raising their child alone and are entitled to a family allowance.

Steuerklasse [tax class] 3:

The 3rd category is slightly more complicated, as it relates to category 5, this including married couples where both spouses work, however, one of them has a much higher income than the other. Yet, the 3rd category is also excellent for those whose spouse is not working at all. In such a case, the higher income spouse should always be taxed according to the 3rd tax category, while the other party will automatically be included into the 5th category.

Steuerklasse [tax class] 4:

If there is a type of taxation that spouses with a high income inequality could choose, then there must be an example to the contrary! This is Steuerklasse 4, which is an excellent choice for those who take home salaries of similar amounts.

Steuerklasse [tax class] 5:

In this case, one of the spouses is included into the 3rd category, whereas the spouse with the lower income being classified into the 5th category. This means that as a percentage more tax is deducted from the lower income, whereas the spouse with the higher income is demanded less from the tax authorities. Ergo: more money for the family budget.

Steuerklasse [tax class] 6:

This category includes employees having side jobs and multiple job – holders or people not living only from their salary, but also having a private enterprise.

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