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German Wage Tax (Lohnsteuer) 2026: Everything Employees Need to Know

Wage tax (Lohnsteuer) is the largest deduction on most German payslips. Learn how it is calculated, what affects it, and how to legally reduce it.

Key Wage-Tax Figures for 2026
Figure2026 valueNotes
Basic allowance (Grundfreibetrag)€12,348Income below this is tax-free
Entry marginal rate14%Lowest rate in zone 2
Top rate (Spitzensteuersatz)42%From €69,879 taxable annual income
Wealth surcharge (Reichensteuer)45%From €277,826 taxable annual income
Solidarity surcharge (Soli)5.5% of wage taxOnly from €20,350 annual wage tax
Employee flat-rate deduction€1,230Applied automatically; no receipts needed
Special expenses flat rate€36Applied automatically
What is Lohnsteuer?

Lohnsteuer is not a separate tax — it is the collection method for Einkommensteuer (income tax) applied to employees. Instead of paying tax themselves, employees have their employer withhold the correct amount each month and remit it directly to the tax office.

The calculation is based on your Lohnsteuerabzugsmerkmale (wage-tax withholding characteristics): tax class, registered allowances, child allowances, and church membership. These are stored electronically as ELStAM at the Federal Central Tax Office and retrieved automatically by your employer.

At year end your income tax return reconciles the withheld wage tax against your actual liability. The result is either a refund or — less commonly — a back-payment.

Wage tax and income tax at a glance: how Germany's payroll withholding system works for employees.

How is wage tax calculated?

Germany uses a progressive income tax rate under § 32a EStG. The tax rate rises as income increases — but only for each additional euro, never retroactively on the whole amount. The table below shows the five zones for 2026 (individual assessment).

The 5 Tax Zones for 2026 (taxable annual income)
ZoneIncome rangeMarginal rateDescription
1€0 – €12,3480%Basic tax-free allowance – no wage tax
2€12,349 – €17,79914% – ~24%First progressive zone – rising marginal rate
3€17,800 – €69,878~24% – 42%Second progressive zone – continuing rise
4€69,879 – €277,82542%Flat zone – top rate (Spitzensteuersatz)
5from €277,82645%Wealth surcharge (Reichensteuer)

What affects the amount of your wage tax?

Tax class (Steuerklasse)

Your tax class is the biggest lever for your monthly wage-tax withholding. It determines which allowances are applied during the year. Class III grants a double basic allowance (€24,696); Classes V and VI grant none. Your actual annual tax liability is independent of the class — it is correctly calculated in your tax return or automatic assessment.

All tax classes explained in detail →

Wage-tax allowance (Lohnsteuerfreibetrag)

If you regularly have high deductible expenses, you can apply for a Lohnsteuerfreibetrag at your tax office. It is entered into ELStAM and immediately reduces your monthly withholding. Typical items:

  • Work-related expenses above the flat rate (€1,230/year) — commuting, home office, equipment
  • Double household costs (doppelte Haushaltsführung)
  • Maintenance payments
  • Extraordinary burdens
  • Disability lump sum (Behinderten-Pauschbetrag)
  • Losses from other income sources (e.g. rental property)

Apply via ELSTER or at your local Finanzamt. The allowance typically covers two calendar years before renewal is required.

Child allowance vs. child benefit (Kindergeld)

Parents benefit from either Kindergeld (child benefit: €255/month per child in 2026) or the Kinderfreibetrag (child allowance: €9,312 per child per year). During the annual assessment the tax office automatically runs a favourability check (Günstigerprüfung): if the tax effect of the allowance exceeds the child benefit received, the allowance is applied and the child benefit is offset.

During monthly payroll, children in tax classes I–IV reduce the solidarity surcharge and church tax; the wage tax itself is not directly reduced in-year — that happens during the annual assessment.

Solidarity surcharge and church tax

Two additional amounts may be levied on top of wage tax:

  • Solidarity surcharge (Soli): 5.5% of wage tax. Only due from an annual wage tax of €20,350 (2026). A taper zone up to €37,838 phases in the full rate gradually. Around 90% of employees pay no full Soli.
  • Church tax: 8% of wage tax (Bavaria, Baden-Württemberg) or 9% (all other states). Only for registered church members.
ELStAM – Electronic wage-tax withholding data

Since 2013, all wage-tax-relevant data has been stored electronically at the Federal Central Tax Office (BZSt). Your employer retrieves your ELStAM automatically using your tax identification number — there is no longer a paper wage-tax card.

The following characteristics are stored in ELStAM:

  • Tax class
  • Number of child allowance fractions
  • Religious denomination (for church tax)
  • Registered allowances and surcharges
  • Foreign-assignment supplements

Changes (e.g. a tax class switch, a new allowance) are entered by the tax office into ELStAM. Your employer sees the update at the next retrieval and applies it in the next payroll run. You can check your ELStAM data at any time for free at elster.de.

Wage tax vs. income tax: the annual settlement

Monthly wage-tax withholding is an advance payment towards annual income tax. It is calculated assuming your income is evenly distributed throughout the year — which in practice often leads to differences:

  • Starting or changing jobs mid-year
  • Fluctuating bonuses or one-off payments
  • Short-time work or extended sick leave
  • High work-related expenses, special deductions, or extraordinary burdens

All of these can result in a refund after filing your return. In some cases — e.g. tax-free wage replacement benefits such as Kurzarbeitergeld subject to the progression clause — a back-payment may arise instead.

Frequently Asked Questions about Wage Tax

What is the difference between Lohnsteuer and Einkommensteuer?
Lohnsteuer (wage tax) is not a separate type of tax — it is simply the collection method for income tax (Einkommensteuer) applied to employees. While the self-employed and business owners pay income tax through advance payments and a tax return, employers withhold wage tax directly from gross salary and remit it to the tax office. At year end the two are reconciled in the annual income tax assessment: any excess withheld is refunded; any shortfall is collected.
Can I get overpaid wage tax back?
Yes — and it is usually worthwhile. If your actual income tax liability is lower than the wage tax your employer withheld, the tax office refunds the difference. Common reasons for a refund: high work-related expenses (e.g. home office, commuting, training), special deductions, extraordinary burdens, tax class V/VI, or changing jobs mid-year. According to Germany's Federal Statistical Office, employees receive an average refund of around €1,000. The 2026 income tax return is due by 31 July 2027 (or 28 February 2028 if filed through a tax adviser).
What is a wage-tax allowance (Lohnsteuerfreibetrag) and how do I apply?
A Lohnsteuerfreibetrag reduces your taxable income during the year, so your employer withholds less wage tax from the outset. Typical items: work-related expenses above the flat-rate deduction (€1,230 p.a.), special deductions, extraordinary burdens, disability lump sum, or double household costs. Apply at your local Finanzamt or via ELSTER (elster.de); the allowance is entered into your ELStAM data. Note: if the approved allowance exceeds your actual expenses, a back-payment may arise when you file your return.
From what income does the top tax rate apply?
The top rate of 42% applies in 2026 to taxable annual income from €69,879 upwards. Importantly, this is a marginal rate — it applies only to the portion of income above that threshold, not to the entire amount. Your average tax rate is therefore significantly lower. From €277,826 the so-called Reichensteuer of 45% applies to all further income. Relevant for many employees: bonus or holiday pay is often taxed at the current marginal rate, which can mean noticeably higher deductions on those payments.
What does the progressive rate system mean for my wage tax?
Germany's progressive system means the tax rate rises as income increases — but not in steps. Every euro is taxed at the marginal rate applicable to it, and the rate increases continuously from 14% at the entry point to 42%. Income up to the basic allowance (€12,348) is tax-free. There is no cliff where a higher rate suddenly applies to your entire income. This ensures that lower earners pay proportionally less than high earners. One practical implication: a small salary rise near a zone boundary is always worth it, because only the extra amount is taxed at the higher rate.

How much wage tax do you actually pay?

Calculate your net salary — including wage tax, Soli, church tax, and social security contributions — free and without registration.

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