Income Tax Basics: Understanding Your First Tech Tax Bracket in the EU

/ Salary & Compensation Insights

You just got your first offer for a tech job in Germany: €65,000 per year! You’re rich!

Then you get your first payslip. And you see that your “net” (take-home) pay is almost 40% less than your “gross” (total) salary.

Welcome to European taxes. It’s a shock, but it’s not a mystery. Understanding how it works is key to planning your life.

1. Gross vs. Net: The Only Thing That Matters

  • Gross Salary: This is the big, impressive number in your contract (e.g., €65,000).
  • Net Salary: This is the actual amount that hits your bank account.
  • The Gap: The space between is your total “contribution.” It’s not just “tax.” It’s:
    • Income Tax (for the government)
    • Health Insurance (your half)
    • Pension Insurance (your half)
    • Unemployment Insurance (your half)
    • Long-term Care Insurance (your half)

In Germany, your employer pays a matching half for all these social insurances. Your “high tax” is actually a 50/50 partnership with your employer for your entire social safety net.

2. It’s Progressive: You Don’t Pay 42% on Everything

This is the most common misunderstanding.

“Germany has a 42% tax rate!”

No. Germany has tax brackets. A “progressive” system means you pay more only on the money you earn above a certain level.

A Simple (Illustrative) Example:

  • On the first €11,00t, you pay 0% tax.
  • From €11,001 to €67,000, you pay 14% – 42% (it slides up).
  • Only on income above €278,000 do you pay 45%.

You are never punished for earning more. You just pay a higher rate on the extra money you earn.

3. Your “Tax Class” (Steuerklasse) Changes Everything

In Germany, your tax rate isn’t just about your income; it’s about your life. Your “Steuerklasse” (tax class) determines your monthly deductions.

  • Class 1: Single, no kids. This is the “default” for most tech expats.
  • Class 2: Single parent (you get tax breaks).
  • Class 3: Married, and you earn much more than your spouse.
  • Class 4: Married, and you both earn about the same.
  • Class 5: Married, and you earn much less than your spouse.
  • Class 6: You have a second job.

A married developer (Class 3) earning €65,000 will take home significantly more per month than a single developer (Class 1) earning the exact same salary.

Example: A Single Developer in Berlin

  • Gross Annual Salary: €65,000
  • Tax Class: 1 (Single)
  • Gross Monthly: ~€5,417
  • Your Contributions (Approx.):
    • Income Tax: ~€900
    • Social Security (Health, Pension, etc.): ~€1,100
  • Net Monthly (Take-Home): ~€3,417

Yes, it’s a 37% drop. But remember: that €1,100 is not “tax.” It’s your half of your pension and health insurance, which you are forced to save/pay for. Your employer is paying another €1,100 on top.

A staffing agency get-talent.eu in the EU should always be able to provide you with a reliable “gross-to-net calculator” for the specific country you’re looking at. Always ask for this before you accept an offer.

References

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