Tax rates in Germany span a progressive personal income tax of 14% to 45%, employee social security contributions of roughly 20% of gross pay, a standard 19% value added tax on most purchases, a flat 25% tax on investment income, and a combined corporate burden that averages around 30% once trade tax is added. Property, inheritance, and vehicle taxes sit alongside these at their own rates. What you actually pay depends on where you live, how you earn, and, for some taxes, which municipality or state you’re in.
Who German Tax Rates Apply To
Your tax obligations in Germany turn on residency, not citizenship. If you maintain a home in Germany or spend more than six months of a calendar year there, you’re a tax resident with unlimited liability, and Germany taxes your worldwide income.1Finanzämter Baden-Württemberg. Under What Conditions Am I Liable for Income Tax? Even a room at a friend’s place can count as a home if it’s always available to you.
Non-residents who earn income from German sources face limited liability, which covers things like rent from a German property or wages for temporary work in Germany. Under certain conditions, non-residents can apply to be treated as fully tax-resident, opening the door to deductions and allowances otherwise unavailable.
Personal Income Tax Rates
Germany uses a mathematically progressive formula rather than discrete brackets, so the marginal rate climbs smoothly through the middle range. For 2026:
- €0 to €12,348: no tax. This is the basic tax-free allowance (Grundfreibetrag). Married couples filing jointly get double at €24,696.
- €12,349 to €69,878: rates start at 14% and climb geometrically to 42%. There’s no sudden jump.
- €69,879 to €277,825: a flat 42% marginal rate on each additional euro.
- Above €277,825: the top rate of 45%, sometimes called the Reichensteuer.
These thresholds are for single filers; married couples filing jointly get double across every band.
Solidarity Surcharge
A 5.5% solidarity surcharge sits on top of your calculated income tax, not your gross income.2Bundesregierung. Solidarity Surcharge Most ordinary earners never pay it. If your total income tax liability stays below €19,950 as a single filer or €39,900 for married couples, the surcharge doesn’t apply at all. Above those thresholds a sliding scale phases it in gradually before it reaches the full 5.5%.
Child Tax Allowance
Parents can claim a child tax-free allowance (Kinderfreibetrag) of €6,828 per child for 2026, split equally between both parents.3Familienportal des Bundes. Tax Allowances for Children Single parents can claim the full amount under certain circumstances. The tax office automatically checks whether you’re better off receiving monthly child benefit payments (Kindergeld) or using the allowance, and applies whichever gives the bigger advantage.
Social Security Contribution Rates
Social security in Germany is substantial and shared roughly equally between employer and employee. The four mandatory branches and their 2026 rates:
- Pension insurance: 18.6% total, 9.3% each. Contributions apply only to earnings up to €101,400 per year.
- Unemployment insurance: 2.6% total, 1.3% each. Same €101,400 ceiling.
- Health insurance: 14.6% base rate (7.3% each) plus an average 2.9% supplementary rate in 2026, also split equally. Contributions apply only to earnings up to €69,750 per year.
- Nursing care insurance: 3.6% base (1.8% each). Childless workers aged 23 and older pay a surcharge that brings their total to 4.2%. Parents with two or more children under 25 get reductions of 0.25% per additional child.
Everything above a ceiling is exempt from contributions for that branch, so high earners pay a lower effective social security rate as a share of total income.
Employees earning more than €77,400 per year in 2026 can opt out of the public health insurance system and switch to private coverage. Self-employed workers and civil servants can choose private insurance regardless of income. Returning to the public system is difficult once you leave, especially after age 55.
Value Added Tax
Germany charges a 19% standard VAT on most goods and services.4Your Europe. VAT Rules and Rates – Standard, Special and Reduced Rates A reduced 7% rate applies to everyday essentials like groceries, books, newspapers, and public transportation. Starting in 2026, restaurant meals also qualify for the 7% rate, a change that had been temporary during the pandemic and is now being made permanent.
VAT is baked into sticker prices at stores and restaurants throughout Germany, so the price you see is the price you pay. Businesses registered for VAT can reclaim the tax they pay on business purchases through regular filings.
Business Tax Rates
Companies face two main taxes: a federal corporate income tax and a municipal trade tax.
Corporate Income Tax
Corporate income tax is levied at a flat 15% on taxable profits.5Germany Trade and Invest. Corporate Taxation in Germany The 5.5% solidarity surcharge applies on top, bringing the effective federal rate to 15.825%.
Trade Tax
Trade tax is where location really matters. Every municipality sets its own multiplier (Hebesatz), which must be at least 200% but has no legal ceiling.6Germany Trade and Invest. Trade Tax The multiplier is applied to a federal base rate of 3.5% of business income. With the national average multiplier slightly above 400%, most businesses pay a trade tax rate around 14%, though it varies significantly city to city.
Sole proprietors and partnerships get a €24,500 trade tax-free allowance on business profits, which can shield smaller businesses entirely. Corporations don’t receive this allowance.
Combining corporate income tax, the solidarity surcharge, and trade tax, the total burden on corporate profits averages around 30%. Some smaller municipalities offer combined rates below 25%, while expensive cities like Munich push the total closer to 33%.5Germany Trade and Invest. Corporate Taxation in Germany
Capital Gains and Investment Income
Investment income from dividends, interest, and securities sales is taxed at a flat 25%.7Finanzämter Baden-Württemberg. Abgeltungsteuer – What Is It and Where Can I Find More Information About It? With the 5.5% solidarity surcharge, the effective rate comes to 26.375% before church tax.2Bundesregierung. Solidarity Surcharge Banks and brokerages typically withhold this automatically.
Each individual gets a €1,000 annual investor’s allowance (€2,000 for married couples filing jointly). Investment income below that threshold is tax-free. The allowance covers dividends, interest, and capital gains combined, not each separately.
Church Tax
If you’re registered as a member of a recognized religious community, you’ll pay church tax (Kirchensteuer) on top of your income tax. The rate is 8% in Bavaria and Baden-Württemberg and 9% everywhere else. It applies to your income tax liability, not your income, so the impact on take-home pay is smaller than the headline suggests. Formally leaving the church through your local civil court or registry office is the only way to stop the charge.
Real Estate Tax Rates
Real Estate Transfer Tax
Buying property triggers a one-time transfer tax (Grunderwerbsteuer) of 3.5% to 6.5% of the purchase price, depending on the state.8Germany Trade and Invest. Taxation of Real Estate Most states charge 5% or higher. Notary fees and land registry costs typically add another 1.5% to 2% on top.
Annual Property Tax
Property owners also pay an annual property tax (Grundsteuer) to their municipality. The amount depends on the assessed value of the property, its type, and the local rate. Germany overhauled how property values are assessed, with the new system taking effect in 2025. Bills vary widely by location and property size, so there’s no single national figure that captures a typical amount.
Inheritance and Gift Tax Rates
Germany taxes transfers of wealth on death and as lifetime gifts. Rates run from 7% to 50%, with both the rate and the tax-free allowance depending on how closely related the recipient is to the giver:
- Spouses and life partners: €500,000 allowance. Rates on amounts above start at 7% and reach 30% on taxable amounts over €26 million.
- Children and stepchildren: €400,000 allowance. Same rate schedule as spouses.
- Grandchildren: €200,000 allowance.
- Siblings, nieces, nephews, and parents receiving gifts: only €20,000 tax-free, with rates from 15% to 43%.
- Unrelated recipients: €20,000 allowance with rates from 30% to 50%.
These allowances reset every ten years, which is why wealthy families sometimes plan gifts in decade-long cycles. The gap between how spouses and siblings are treated is dramatic and catches many people off guard.
Motor Vehicle Tax
Every registered vehicle owes an annual motor vehicle tax (Kraftfahrzeugsteuer) based on engine size and CO₂ emissions. For cars registered since January 2021, a graduated scale applies: the first 95 g/km of CO₂ is tax-free, and each gram above that threshold is taxed at rates climbing from €2.00 per gram up to €4.00 per gram for vehicles emitting above 195 g/km. A base rate also applies per 100cc of engine displacement: €2 for petrol and €9.50 for diesel. Fully electric vehicles registered before the end of 2025 are exempt for up to ten years.