The national currency is the Euro (EUR). In 2023, EUR 0.96 was equal to USD 1. The average worker earned EUR 60 867 (annual Secretariat estimate for 2023).1

Generally, the tax unit is the individual. Spouses may choose between two options: Joint assessment or individual assessment. In the case of joint assessment, the tax unit is the married couple. For the vast majority of couples joint assessment is beneficial compared to individual assessment. The income of dependent children is not assessable with that of the parents. Therefore, the calculations in this Report are based on the assumption of joint taxation for spouses.

  • Basic reliefs: None.

  • Standard marital status reliefs: In the case of joint assessment the income tax liability for spouses is computed by the following splitting method:

    • First step: The taxable incomes of the spouses are calculated, summed up (specific allowances are doubled) and the resulting sum is divided by two.

    • Second step: The tax rate is applied to this averaged tax base.

    • Third step: The tax liability is calculated by doubling the result of step two.

Results: Given the progressive income taxation and different income levels the resulting tax liability for the couple is lower than with individual taxation. That is why the household as an economic unit benefits from this system. The splitting effect is the highest for couples with one zero taxable income and decreases with converging incomes of spouses. The splitting method results in identical average and marginal income tax rates for the principal and second earner, irrespective of the income distribution among them.

  • Relief(s) for children: In 2023, there are equal tax credits of EUR 3 000 for the first and every subsequent child. There is an increased tax allowance per parent of EUR 3 012 for the subsistence of a child and an additional EUR 1 464 for minding and education or training needs (EUR 4 476). The amount of these allowances is doubled in case of jointly assessed parents and for lone parents if the other parent does not pay alimony. If the value of the tax credit is less than the relief calculated applying the tax allowances, the tax allowance is applied instead of the tax credit. In the calculations presented in this Report we assume that a lone parent always receives the doubled child allowances.

  • Relief for lone parents: As of 1 January 2015, taxpayers who live alone with at least one child that entitles them to the tax allowances or tax credits for children, receive a standard additional allowance of EUR 1 908 (formerly EUR 1 308). This additional allowance is increased by EUR 240 for each child in case of more than one child living in the household.

    In 2020, the standard tax allowance for lone parents has been increased to EUR 4 008. Initially, this has been a temporary measure for the years 2020 and 2021 to mitigate the particular challenges faced by this family type due to the pandemic. Later on, the increase was made permanent from 2022 onwards to further support single parents. As of 1 January 2023, the standard tax allowance for lone parents adds up to EUR 4 260.

  • Reliefs for social security contributions and life insurance contributions: Social security contributions and other expenses incurred in provision for the future (e.g., life insurance) are deductible up to specific ceilings. The calculation scheme that came into effect in 2005 has been modified as of 1 January 2023:

    • All contributions made to pension funds (i.e., both employee’s and employer’s contributions) are added up. The resulting amount is limited to the equivalent of the maximum contribution rate to miners’ pension insurance scheme, rounded up to the nearest euro (in 2023: EUR 26 528). Within the aforementioned limit contributions to pension funds, diminished by the (tax-free) employers’ share, are deductible from income.

    • The tax treatment of social security expenses (health, unemployment and care insurance) changed as of 1 January 2010. Employees’ annual contributions to statutory health insurance excluding sickness benefit (assumed to amount to 96% of statutory health contributions) and employees’ contributions to mandatory long-term care insurance are deductible from the tax base. In case these contributions do not exceed EUR 1 900/3 800 (single/married couples), contributions to unemployment insurance and other insurances premiums can be deducted in addition up to this ceiling.

  • Work related expenses: Increased EUR 1 230 lump-sum deduction for work related expenses per gainfully employed person (until 2022: EUR 1 200). Work related expenses that exceed the lump-sum are fully deductible (no ceiling). In December 2020, a "home office" deduction for the years 2020 and 2021 came into effect. It added up to EUR 5 per day spent exclusively working at home and was limited to a maximum amount of EUR 600 per year (corresponding to 120 working days) and was prolonged for the year 2022. As of 1 January 2023, the "home office" deduction is extended to EUR 6 per day spent exclusively working at home and is now capped at the maximum amount of EUR 1 260 per year (corresponding to 210 working days). The ”home office” deduction is counted against the general lump sum deduction for work-related expenses.

  • Special expenses: Lump sum allowance (EUR 36/72 (singles/couples)) for special expenses, e.g., for tax accountancy. The actual expenses will be fully deductible from taxable income if the taxpayer proves that these expenses exceed the lump sum allowance.

  • Relief measure due to high inflation: From October 2022 until the end of 2024, employers have the opportunity for additional one-off payments of up to EUR 3 000 (in total) tax and social security free to compensate employees for high inflation (“Inflationsausgleichsprämie”).

  • Contributions to pensions, life insurance, superannuation schemes: Other expenses than the compulsory contributions to social security are deductible as reliefs for (voluntary) social security contributions up to specific ceilings (see section

  • Medical expenses: Partially deductible if not covered by insurance.

The German tax schedule is formula based. Taxable income is rounded down (to the EUR).

  • The basic allowance in 2023 is EUR 10 908.

  • X is the taxable income,

  • T is the income tax liability,

  • As of 1 January 2023, the following definitions are used in the income tax liability formulas:

Y=X  10 908 10 000

Z=X 15 99910 000

The income tax liability (amounts in EUR) is calculated as follows:

1. T=0 for X   10 908 

2. T=979.18  Y + 1 400Y for  10 909  X 15 999

3. T=192.59  Z + 2 397Z + 966.53  for 16 000  X 62 809

4. T=0.42 X- 9 972.98  for 62 810  X277 825

5. T=0.45 X-18 307.73  for  277 826 X

These formulas are used to calculate the income tax for single individuals and married couples too.

If families choose the option of being assessed separately these formulas are applied to the individual taxable income of the principal earner and the spouse. In the case of jointly assessed families these rates are applied to half of the joint taxable income (see point Splitting method).

As of 1 January 2023, the solidarity surcharge is levied at 5.5% of the income tax liability subject to an extended exemption limit of EUR 17 543/35 086 (singles/couples). The income tax liability is calculated applying the tax allowance for children. If the income tax liability exceeds the exemption limit, the solidarity surcharge will be phased in at a higher rate of 11.9% of the difference between the income tax liability and the exemption limit until it equals 5.5% of the total liability.


The amount of social security contributions depends on the wage level and the insurance contribution rates. All contributions are subject to a contribution ceiling, i.e. the maximum income up to which statutory insurance contributions are calculated. The contribution rates for pension, health, care and unemployment insurances are fixed by the government.

In general, earnings up to EUR 4 800 per year were free of employee social security contributions until 31 December 2012. As of 1 January 2013, some essential changes came into effect concerning minimally paid employment. The earnings limit increased from EUR 400 to EUR 450 per month. As of 1 October 2022, the upper earnings limit rose to EUR 520 per month (now a dynamic limit linked to the general statutory minimum wage of EUR 12 per hour). Persons whose mini-job started before 2013 and do not exceed the previous earnings limit of EUR 400 stay contribution-free in all classes of social insurance. Otherwise, persons who take up a new mini-job are generally subject to mandatory insurance coverage in the statutory pension scheme with the full pension contribution rate of 18.6% (in 2023). If the earnings are below the amount of EUR 175 (minimum contribution limit), a minimum contribution of EUR 32.55 has to be paid (18.6% of EUR 175). The employer’s share amounts to 15% of the whole pay whereas the employee’s part adds up to 3.6% (or the difference between minimum contribution and employer share). By applying for an exemption from obligatory insurance coverage the mini-job holder may reduce his/her share to EUR 0.

As of 1 April 2003, there was an additional concession for employees with monthly income between EUR 400.01 and EUR 800 per month (the so-called ‘sliding pay scale’, EUR 4 800.12 and EUR 9 600 per year). Due to the new regulations in 2013 mentioned above the earnings limits shifted to EUR 450.01 and EUR 850.00 per month (EUR 5 400.12 and EUR 10 200 per year). As of 1 July 2019, provisions for the newly-created so-called ‘transition band’ extend the upper earnings limit from EUR 850 per month to EUR 1 300 per month (EUR 15 600 per year). As of 1 October 2022, the earnings limits within the ‘transition band’ increased to EUR 520.01 and EUR 1 600 per month (EUR 6 240.12 and EUR 19 200 per year). As of 1 January 2023, the upper earnings limit increases from EUR 1 600 to EUR 2 000 per month (EUR 24 000 per year). If the employee’s income falls within this range, part of the income is exempt from social insurance contributions. The employees’ contributions to social insurance rise from zero on a straight-line basis over the income band reaching the full rate at EUR 2 000 per month. Until 30 September 2022, employers were required to pay the regular contributions of around 20 percent on the employee’s earnings. Under the new regulations, the employer’s share decreases from around 28 percent for a regular wage of EUR 521 to the standard employer’s contribution amounting to around 20 percent for earnings at the upper ‘transition band’ limit. The arrangement is purely intended to relieve the financial burden on employees. Within the ‘transition band’, employees’ reduced contribution rates to statutory pension insurance do not reduce their pension entitlements. Details on social security contributions for workers earning more than EUR 24 000 in 2023 are provided below.

Employers and employees pay each half of the contribution rate of 18.6% in 2023, that is 9.3% of the employee’s gross wage earnings, up to a contribution ceiling of EUR 87 600.

As of 1 January 2015, the applicable contribution rate is 14.6% on principle (portion of 7.3% for employers and employees). Depending on the financial situation of each sickness fund, employees only were obliged to pay a supplementary contribution to the sickness fund until December 2018. Since January 2019, employees and employers have to pay one half each of this supplementary contribution which amounts to 1.6% on average in 2023 (portion of 0.8% for employers and employees). Therefore, the contribution rate averages 8.10% for employers and employees in 2023. The contribution ceiling in 2023 is EUR 59 850. While all calculations shown in this Report assume membership in the public health insurance, workers with earnings above the contribution ceiling may opt out of the mandatory public health insurance system and may choose a private insurance provider instead (those opting for a private health insurance provider are required to obtain private long-term care insurance as well).

Employees pay half of the insurance contributions; the employer pays the other half. In 2023, the contribution rate is 2.6% of assessable income. Employee and employer each pay 1.3%. The contribution ceiling in 2023 is EUR 87 600.

A long-term care insurance (a 1% contribution rate) went into effect on 1 January 1995. The rate was raised to 1.7% of the gross wage when home nursing care benefits were added six months later. As of 1 July 2008, the rate was increased to 1.95%. In 2013 and 2014, the contribution rate amounted to 2.05%. In 2015 and 2016, the contribution rate added up to 2.35%. As of 1 January 2017, the contribution rate was augmented to 2.55%. As of 1 January 2019, the contribution rate amounted to 3.05% until 30 June 2023. Since 1 July 2023, the standard contribution rate has been increased to 3,4%. The employers pay half of the contributions for long-term care insurance. In other words, employers and employees both pay a rate of 1.70%. The assessable income is scaled according to the gross wage earnings but there is a contribution ceiling of EUR 59 850 in 2023.

Due to the order of 7 April 2022 of the First Senate of the Federal Constitutional Court the legal framework for long-term care insurance was reformed in 2023. The new regulations provide different contribution rates for parents with two up to five children in order to reflect the costs associated with raising additional children. As of 1 July 2023, the contribution rate for parents of several children aged under twenty-five is reduced by 0.25% percentage points per child which means a reduction of 1,0% percentage points for parents with five or more children.

As from 1 January 2005, child-raising is given special recognition in the law relating to statutory long-term care insurance. Childless contribution payers were required to pay a supplement of 0.25%, raising the contribution rate paid by a childless employee from 0.975% to 1.225% as of 1 July 2008. In 2013 and 2014, the contribution rate of a childless employee added up to 1.275%. In 2015 and 2016, the contribution rate amounted to 1.425% for a childless employee. As of 1 January 2017, the contribution rate was raised to 1.525% for a childless employee. Since January 2019, a childless employee has had to pay a contribution rate of 1.775%. As of 1 January 2022, the contribution rate added up to 1.875% for a childless employee until 30 June 2023. As of 1 July 2023, the contribution rate amounts to 2.3% for a childless employee. This regulation does not affect the employer’s payment. Employer always have to pay half of the standard contribution rate.

Employer only.



See Section 2.1.

See Section 2.1.

Germany has established a statutory occupational accident insurance. It is provided by industrial, agricultural and public-sector employers’ liability insurance funds. This insurance protects employees and their families against the consequences of accidents at work and occupational illnesses. It is funded by contributions paid by employers only. The amount of the employer’s contributions depends on the sum total of employee’s annual pay and the employer’s respective hazard level. As it is not possible to identify a representative contribution rate, these amounts are not considered in this Report.





The following table shows changes in the tax credit and the tax allowance for children since 1997:

Up to 2004, the calculation of the relief for social security contributions and other expenses proceeded in three steps. First, EUR 3 068/6 136 (singles/couples) was deducted. These amounts were, however, lowered by 16% of gross wages (serving as a proxy for employers’ social security contributions). This deduction was provided as a partial compensation for the self-employed who do not receive tax-free employers’ social security contributions. Second, the remaining expenses were deductible up to EUR 1 334/2 668 (singles/couples). Third, half of the remaining expenses were deductible up to EUR 667/1 334 (singles/couples).

In 2004, the tax rate was reduced and the formula for calculating the income tax was changed. The relief for lone parents was reduced to EUR 1 308, the lump sum allowance for work related expenses was reduced to EUR 920.

As from 1 January 2005, the final stage of the 2000-tax reform came into effect. The bottom and top income tax rates were further reduced to 15% and 42%. Since 1998, both the bottom and top income tax rate have been reduced by about 11 percentage points while the personal allowance has been raised from EUR 6 322 to EUR 7 664. The tax cuts reduce the tax burden for all income taxpayers, affording the greatest relief to employees and families with low and medium incomes as well as to small- and medium-sized unincorporated businesses.

On 1 January 2005, the law regulating the taxation of pensions and pension expenses entered into force. The law provides a gradual transition to ex-post taxation of pensions paid by the statutory pensions insurance. In the long run, the tax treatment of capital-based employee pension schemes based on a contract between employer and employee will be reformed in the same way as the tax treatment in respect of the state pension scheme. In addition to the increased deductibility of contributions to the state and certain private pension schemes, the law contains rules which are intended to increase the attractiveness of private capital-based pension schemes and to encourage individuals to invest privately for their old-age pension.

Up to 30 June of 2005, employees paid half of the sickness insurance contributions; the employer paid the other half. As from 1 July 2005, members of the statutory health insurance scheme also paid an income-linked contribution of 0.9% to which employers do not contributed. In return from 1 July 2005, all statutory health insurance funds have reduced their contribution rates by 0.9 percentage points.

In 2007, a new top income tax rate of 45% was introduced for taxable income above EUR 250 000 (EUR 500 000 for jointly assessed spouses).

In 2009, the bottom income tax rate was reduced to 14%. The basic allowance was increased to EUR 7 834. All thresholds were increased by EUR 400.

Since 1 January 2010, the basic allowance has been augmented to EUR 8 004 and all thresholds have been increased by EUR 330. Furthermore, new legislation improves the tax treatment of expenditure on health insurance and long-term care insurance. As of 1 January 2013, the basic allowance rose to EUR 8 130. As of 1 January 2014, the basic allowance was increased to EUR 8 354. As of 1 January 2015, the basic allowance amounted to EUR 8 472. The standard relief for lone parents adds up to EUR 1 908. Lone parents are entitled to an extra allowance of EUR 240 for the second and each subsequent child.

In 2020, the standard tax allowance for lone parents was increased to EUR 4 008. Initially, this was a temporary measure for the years 2020 and 2021 to mitigate the particular challenges faced by this family type due to the pandemic. Later on, the increase was made permanent from 2022 onwards to further support single parents. As of 1 January 2023, the standard tax allowance for lone parents amounts to EUR 4 260.

Since 1 January 2016, the basic allowance has been risen to EUR 8 652. As of 1 January 2017, the basic allowance was enhanced to EUR 8 820. Since 1 January 2018, the basic allowance has been augmented to EUR 9 000. As of 1 January 2019, the basic allowance was raised to EUR 9 168. In 2020, the basic allowance amounted to EUR 9 408. In 2021, the basic allowance has been increased to EUR 9 744 and the thresholds for tax rates have been increased to account for the impact of inflation. The basic allowance was further increased from EUR 9 984 to EUR 10 347 with retroactive effect from 1 January 2022 (moving the thresholds for tax rates accordingly). As of 1 January 2023, the basic allowance adds up to EUR 10 908 (see section 1.1.3.).

The steep increase of the thresholds for the solidarity surcharge (see section 1.1.4.) corresponds to an abolishment for around 90% of those who paid it in 2020. For a further 6.5% of taxpayers, the surcharge has been reduced this way. As of 1 January 2023, the exemption limit for raising solidarity surcharge is extended to an income tax liability of EUR 17 543/35 086 (singles/couples).

The basic allowance was increased from EUR 9 984 to EUR 10 347 with retroactive effect from 1 January 2022 (moving the thresholds for tax rates accordingly). The tax allowance per parent for the subsistence of a child was also increased from EUR 2 730 to EUR 2 810 with retroactive effect from 1 January 2022. Similarly, the standard tax allowance for employees was increased by EUR 200 to EUR 1 200.

In 2022, families with children received a one-time bonus benefit payment of EUR 100 per child, . The bonus will not be offset against basic income support for jobseekers. However, in the case households with higher incomes, the bonus will be offset against the tax allowance for children.

Furthermore, all workers who are liable for income tax received a one-off energy price allowance of EUR 300. This lump-sum payment will be subject to income tax, but not to social security contributions.

As of 1 January 2023, the basic allowance adds up to EUR 10 908. The standard tax allowance for employees amounts to EUR 1 230, and the “home office deduction”, which is counted against the standard tax allowance for work-related expenses, is extended from EUR 5 to EUR 6 per day spent exclusively working at home and is now capped at the maximum amount of EUR 1 260 per year (corresponding to 210 working days, formerly 120 working days).

  • Source of calculation: Federal Statistical Office.

  • Excluding sickness and unemployment, including normal overtime and bonuses.

No information available, though such schemes do exist.

The equations for the German system in 2023 are mostly calculated on a family basis.

The standard functions which are used in the equations are described in the technical note about tax equations. The function acttax carries out a rounded calculation for the tables but the unrounded version purtax is used in calculating the marginal rates.

For a taxpayer with children, either the child allowance is given in the tax calculation or the cash transfer is given if this is more beneficial. In practice, therefore, it is necessary to make two calculations - with and without the child allowance. Nevertheless, the calculation of solidarity surcharge is always based on the calculation which does assume that the child tax allowance is given.

Variable names are defined in the table of parameters above, within the equations table, or are the standard variables “married” and “children”. The affixes “_princ” and “_spouse” on Variable names in functions indicate that the values have to be calculated for the principal and spouse, respectively. The parameter year in function SSC_Allowance is the year for which you calculate the Allowance.


← 1. For Germany, the increase in the average wage in 2023 is to a significant extent due to payments of the so-called “Inflationsausgleichsprämie” (see This instrument was widely used by employers and labour unions in collective bargaining agreements for 2023 and 2024. As the payments are tax and social security free, the average and marginal rates for Germany in 2023 would be overestimated if the payments would not be taken into account. Therefore, an estimated amount for the payment in 2023 for the average worker is included in the model calculations for Germany (see parameter values below).

← 2. To prevent an overestimation of the tax wedge for Germany in 2023, the payment of tax and social security free “Inflationsausgleichsprämie” is included in the model. However, no official data on the average amount of the payment exists. Therefore, it has to be estimated. The payment for the average worker is set to 900 euros based on estimations from the Federal Government in their economic forecast and the leading German research institutes in their joint forecast. The estimate is surrounded by considerable uncertainty.

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