The German tax system has undergone various changes in recent years, particularly in 2023 and 2024. These changes have a significant impact on various aspects of daily life in Germany, from personal income tax rates to social benefits and exemptions.
Personal Income Tax and Allowances
Basic Tax Allowance: For the year 2024, the basic tax allowance in Germany was increased from €10,908 to €11,604 for single individuals and to €23,208 for married couples. This means income below these thresholds is not subject to tax.
Income Tax Rates: The income tax rates in Germany are progressive, ranging from 0% for income below the basic allowance to 42% for incomes above €62,810, and 45% for incomes exceeding €277,826.
Child Benefits (Kindergeld): In 2023, child benefits were expanded to €250 per month per child. There's also a child tax exemption (Kinderfreibetrag), which was set to increase from €6,024 to €6,384 in 2024. (Read our article for more details on 'Child Benefits'.)
Solidarity Surcharge: The solidarity surcharge, initially applicable to a broader income range, has been limited since 2021. As of 2024, the exemption limit for this surcharge was further increased.
Changes in Social Contributions and Benefits
Minimum Wage Increase: The statutory minimum wage was set to increase in two stages: €12.41 per hour from January 1, 2024, and then to €12.82 from January 1, 2025.
Mini-Job Threshold: The earnings threshold for mini-jobs rose to €538 per month in 2024.
Bürgergeld: The standard rates for long-term unemployment income and social assistance saw an increase in 2024. For example, single adults now receive €563 per month, which is a noticeable increase from previous rates.
Tax Classes and Filing
Tax Classes: Germany has various tax classes (Steuerklassen) that impact payroll tax deductions. These are based on marital status, whether you have children, and other factors. Tax class changes are usually required when there are significant changes in family circumstances. (Read our article for more details on 'Tax Classes in Germany'.)
Filing Deadlines: For individuals preparing their own income tax assessments, the deadline is typically July 31 of the following year. However, if a chartered tax advisor is filing, this deadline is extended.
Church Tax: Members of recognized German churches pay church tax based on their annual taxable income. The rate depends on the state (Bundesland).
Corporate and Business Taxation
Corporate Income Tax: German corporations are subject to a corporate income tax rate of 15%, plus a solidarity surcharge of 5.5% of that tax.
Trade Tax: Each corporation, commercial partnership, or branch of a non-resident company is subject to local German trade tax, with rates varying by city or municipality.
Additional Points
Penalties for Late Payments: Late payments can attract significant penalties and interest charges.
Social Security Contributions: Employment income is subject to additional social security payments.
For more detailed information and specific guidance, it is advisable to consult a tax professional or the relevant German tax authorities.
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