Especially for the self-employed, tax season can be a stressful time of year in Germany. Not only do you have to contend with the deadlines for submitting your tax return, but you may also have a nasty surprise if you receive a tax bill that’s higher than you expect.

That’s one reason why it’s a good idea to familiarise yourself with the amount of tax you’re expected to pay in Germany. 

Though this is usually calculated automatically for employees, you may have to pay additional tax on other income you earn from a side hustle or a rental property. Or you may submit a tax return offsetting some costs for work equipment and find yourself getting a juicy rebate from the tax office.

For freelancers or small business owners, understanding tax is even more important. You’ll need to have a rough idea of how much you owe the tax office in any given financial year and set this aside so you don’t run into trouble later on. 

That involves knowing what tax rate is likely to apply, how pre-payments are deducted from your tax bill, and what kind of information you’ll find on your Steuerbescheid, or tax statement. Let’s demystify some of these confusing aspects of German tax law so you can read your Steuerbescheid with confidence.

How much income tax will I pay in Germany?

Income tax, or Einkommenssteuer, is a tax levied on all workers in Germany, whether they’re freelance or self-employed.

The amount you pay will be directly linked to the amount you earn, and goes up on a sliding scale along with your income. However, not all of your income is taxed: the German government decides each year on a certain amount of money you’re allowed to earn before you pay tax on it.

To work out how much you might be expected to pay, you’ll need to work out the tax rate that applies to you, how much of your income is taxed, and how much you may have paid already.

In 2023, the Grundfreibeitrag – or tax-free earnings threshold – was €10,908 per year. In 2024, it was hiked to €11,784. This is the amount of your income that won’t be subject to tax. On top of this, people with children get what’s known as a Kinderfreibeitrag, which means they can earn up to €3,192 more per parent before being taxed. 

READ ALSO: Do employees in Germany have to declare tax on a side job?

Everything you earn above this, meanwhile, is subject to what’s known as a progressive tax rate. That means the percentage you pay increases as your income does and can be anything between 14 percent and 42 percent. 

Incomes between €11,784 and €17,005 in 2024, or between €10,908 and €15,999 in 2023, are taxed at the lowest rates of between 14 and 24 percent. 

Once incomes exceed this amount, the tax rate ranges between 24 and 42 percent. The highest rate of tax is applied to incomes over €62,810 in 2023 and to incomes over €66,761 in 2024. This tax rate then remains the same way up to incomes of over €277,826, when a new special rate of 45 percent applies.

If you want to get a sense of where you fall on the sliding scale, this graph produced by Duisburg-Essen University may help. It shows, for example, that an income of €20,000 per year would be taxed at around 25 percent, an income of €36,000 per year would be taxed at around 30 percent, and an income of €60,000 would be taxed at around 38 percent.

Alternatively, you can enter your income into an online tax calculator to get a breakdown of how much you’re likely to owe. 

READ ALSO: The best apps to help you track your German taxes

It’s worth remembering that your income refers to what you earned after deductions for things like office supplies and social security payments, and that married people and people with children also receive additional tax breaks.

When can I expect to receive a tax bill or rebate?

After you submit your tax return, the Finanzamt – or tax office – has up to six months to process it and send you your Steuerbescheid. However, this mostly happens a lot faster, with the average turnaround time standing at around 50 days.

If you submitted a tax return online via the government’s Elster portal, things also tend to move a bit faster.

You may well wonder why tax bills are processed so fast while residence permits and passport applications are so slow – and it’s a good question. But for now, all you need to know is that you could be getting that tax statement sooner than you think.

What information can I find on my tax statement?

Your Steuerbescheid contains a range of information that you should check very carefully, because mistakes do happen. 

When you recieve this document, you can expect to find:

• Your tax number (Steuernummer): The top of your tax statement will include your tax number, which you should double check first. Be aware that this is different from your tax ID number and is linked to your place of residence
• A summary of your tax bill or rebate (Steuerfestsetzung): Here, the tax office will lay out how much tax you owe – or are owed – in a chart at the top of your statement. This part will detail your income tax, solidarity tax and church tax (if applicable) and provide a total that you need to pay, or that you will receive as a rebate
• Breakdown of tax calculations (Besteuerungsgrundlage): This section of your tax statement provides a far more detailed breakdown of how your tax was calculated, so you should read it carefully and cross-check it against your tax return. The tax office will detail how much you earned in that particular tax year, as well as any deductions for things like health insurance or pensions. Your income, minus deductions, will be recorded as ‘zu versteuerndes Einkommen’, or taxable income. This will be the basis for the amount of income tax, solidarity tax and church tax you are expected to pay
• Additional information (Erläuterungen): In this final section, the Finanzamt will usually note down extra information they used in their calculations. For example, if you submitted your tax return late, they may include details of any fines you are likely to face. This part is particularly useful to read because it can usually explain differences between the figures in your tax return and in your tax statement

If you do spot any inconsistencies or think the tax office may have made a mistake, it’s important to get in contact with them as soon as possible.

READ ALSO: 8 unlikely tax breaks in Germany that international residents need to know

You’ll usually have a month from recieving your Steuerbescheid to raise any issues with the Finanzamt. After this deadline has passed, your tax statement will become final. 

What happens if I can’t pay my tax bill?  

If your tax bill takes you by surprise, the first thing to do is keep calm. Though highly stressful, this isn’t a particularly uncommon situation, and the tax office will want to help find a solution.

The simplest thing to do in this case is to submit a Stundenantrag, or application for deferral, which gives you a bit of extra time to find the money to pay your tax bill. If you’d struggle to pay it in a lump sum, applying to pay by Ratenzahlungen – or in instalments – is also a potential option.

Whatever you do, the Finanzamt is likely to give you a more sympathetic ear if you lay out your circumstances fully and show a willingness to pay as soon as you can. 

You can find more information on dealing with this situation in our recent explainer:

What happens if you can’t pay your tax bill in Germany?

Useful vocabulary:

Das Finanzamt – tax office 

Der Steuerbescheid – tax statement

Die Einkommenssteuer – income tax 

Die Einkünfte – earnings 

Der Steuersatz – tax rate 

Die Sonderausgaben – special deductions (usually social security payments) 

Der Steuererstattungsbetrag – tax refund amount

Der Steuernachzahlungsbetrag – amount of tax arrears