Understanding the ins and outs of the German tax system can be a confusing subject for many, including German citizens themselves. What is known is that Germans can expect to spend roughly 50% of their income on taxes every year. From January 1 – July 14 of this year, just about all the income that Germans earn will have gone to paying the taxes for this year. In the U.S. that date is April 13. In order to get a general understanding of where all the money is going, I will try to break down the most common taxes paid by German citizens. This is in no way a complete list… trust me, this will be enough to make you a little less stressed when doing this years taxes.
Einkommensteuer (Income Tax)
Probably one of the most complex taxes to breakdown is the regular income tax. A single person making €8,004 or married couples making €16,008 do not pay income tax. However, once that income bracket is exceeded, the rates range from 14%-45% of their income. As a comparison, U.S. citizens can expect to pay anywhere from 10%-35% in income taxes.
Solidaritaetszuschlag (Solidarity Tax)
Introduced to help rebuild East Germany after reunification, the solidarity tax is still being paid by Germans. This tax was originally meant to be temporary, but the extra tax money became quite handy to the government. Today, 5.5% of the total income goes to pay this tax.
Mehrwertsteuer (Value-Added Tax)
Similar to the U.S. Sales Tax, Germans are required to pay a Value-Added Tax (VAT) for goods and services. The general tax rate is 19%, but there is a reduced rate of 7% which is mainly for food and books. Unlike the U.S., this tax is consistent throughout the country and is included in the posted prices at stores.
Kirchensteuer (Church Tax)
One of the stranger taxes paid by Germans is the church tax. Residents affiliated with one of Germany’s established churches are required to pay a tax ranging from 8%-9% of their yearly income. Germans that decide to remain unaffiliated in order to avoid paying this tax may run into problems when trying to use a church for such things as marriage, baptism, or even burials.
Rundfunkgebuehren (TV Tax)
The church tax isn’t the only odd tax paid by Germans… if there is a TV, radio, or computer present in home, a TV tax needs to be paid to cover licensing fees from the broadcasting companies. This tax is billed monthly but generally paid quarterly with the annual amount totaling €215.76 for TV and €69.12 for radio and internet.
By no means are these the only taxes paid. Germans are also responsible for paying automobile tax, inheritance and gift tax, property tax, trade tax, and more. On top of all the other taxes, individuals must pay social security contributions which cover a range of state benefits including statutory pension funds, unemployment insurance, health insurance, and old age Medicare insurance.