Glossary
Key German tax, salary and social insurance terms explained in plain English – with links to the relevant calculators.
A
Abfindung (Severance Pay)
A lump-sum payment from the employer upon termination of employment. Severance pay is taxed under the "Fünftelregelung" (fifth-rule, § 34 EStG), which spreads the tax over five years to reduce the progressive tax burden. Social insurance contributions generally do not apply.
Severance Pay Calculator →B
Beitragsbemessungsgrenze (Contribution Ceiling)
The income threshold up to which social insurance contributions are calculated. In 2026, it is €5,512.50/month (€66,150/year) for pension and unemployment insurance (West) and €5,175/month (€62,100/year) for health and long-term care insurance.
Bruttolohn (Gross Salary)
The total salary before deduction of income tax, solidarity surcharge, church tax, and social insurance contributions. The gross salary is the basis for all tax and social insurance calculations in Germany.
Gross Net Calculator →Bürgergeld (Citizen's Allowance)
Germany's basic income support for employable individuals, replacing Hartz IV since 2023. The standard rate for single adults is €563/month in 2026, plus housing and heating costs.
Citizen's Allowance Calculator →E
Ehegattensplitting (Income Splitting)
A tax procedure for married couples filing jointly: combined taxable income is halved, tax is calculated on the half, then doubled. Beneficial when spouses have unequal incomes.
Income Splitting Calculator →Einkommensteuer (Income Tax)
Tax on the income of individuals. Germany's progressive tax rate in 2026 starts at 14% (entry rate) and rises to 45% (wealth tax rate from €277,826). The top marginal rate of 42% applies from €68,481.
Income Tax Calculator →Elterngeld (Parental Allowance)
Income replacement for parents after childbirth. Basic Elterngeld is 65-67% of net income (min. €300, max. €1,800/month) paid for up to 14 months.
Parental Allowance Calculator →F
Freibetrag (Tax-Free Allowance)
An amount deducted from taxable income that remains tax-free. The basic allowance (Grundfreibetrag) is €12,096 for singles (€24,192 for married couples filing jointly) in 2026. The child allowance (Kinderfreibetrag) is €6,612 per child.
G
Gewerbesteuer (Trade Tax)
A municipal tax on business profits. The rate depends on each municipality's multiplier (e.g. 490% in Munich, 410% in Berlin). Sole proprietors receive a €24,500 exemption.
Trade Tax Calculator →Grunderwerbsteuer (Property Transfer Tax)
A one-time tax when purchasing real estate, set by each federal state. Rates range from 3.5% (Bavaria, Saxony) to 6.5% (Brandenburg, NRW, Saarland, Schleswig-Holstein, Thuringia).
Property Transfer Tax Calculator →K
Kapitalertragsteuer (Capital Gains Tax)
A flat 25% tax on investment income (interest, dividends, capital gains), plus solidarity surcharge (5.5% of the tax) and possibly church tax. The saver's allowance (Sparerpauschbetrag) is €1,000 per person (€2,000 for couples) in 2026.
Capital Gains Tax Calculator →Kindergeld (Child Benefit)
A state benefit for each child up to age 18 (up to 25 if in education). In 2026, Kindergeld is €255 per month per child. It is paid as a tax credit.
Child Benefit Calculator →Kirchensteuer (Church Tax)
A tax for members of a tax-collecting religious community. 8% of income tax in Bavaria and Baden-Württemberg, 9% in all other federal states. Leaving the church eliminates this tax.
Church Tax Calculator →Krankengeld (Sick Pay)
A wage replacement benefit from statutory health insurance during extended illness. Paid after 6 weeks of employer-paid sick leave, at 70% of gross salary (max. 90% of net), for up to 78 weeks.
Sick Pay Calculator →Kurzarbeitergeld (Short-Time Work Allowance)
A benefit from the Federal Employment Agency during temporary reductions in work hours. Employees receive 60% (67% with children) of lost net wages. Designed to prevent layoffs.
Short-Time Work Calculator →L
Lohnnebenkosten (Employer Costs)
Additional costs borne by the employer on top of gross salary: employer's share of social insurance, levies (U1, U2, U3), and professional association contributions. Approximately 20-22% of gross salary.
Employer Costs Calculator →Lohnsteuer (Wage Tax)
A form of income tax withheld directly from wages by the employer. The amount depends on the tax class, allowances, and church tax liability. It is remitted monthly to the tax office.
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Midijob (Transition Zone)
Employment with monthly earnings between €556.01 and €2,000 (2026). In this transition zone, the employee's social insurance contributions increase gradually from ~0% to the full rate.
Midijob Calculator →Minijob (Marginal Employment)
Employment earning up to €556/month (2026, linked to minimum wage). The employee pays no income tax and no social insurance (except optional pension contributions). The employer pays flat-rate contributions.
Minijob Calculator →N
Nettolohn (Net Salary)
The take-home pay after deduction of all taxes (income tax, solidarity surcharge, church tax) and social insurance contributions (health, long-term care, pension, unemployment) from gross salary.
Gross Net Calculator →P
Pendlerpauschale (Commuter Allowance)
A tax-deductible travel expense for commuting: €0.30 per km (one way) for the first 20 km, then €0.38/km. Applies regardless of transport mode. Maximum €4,500/year (without own car).
Commuter Allowance Calculator →Progressionsvorbehalt (Progression Clause)
A tax principle for wage replacement benefits (parental allowance, short-time work, unemployment benefits): the benefit itself is tax-free but increases the tax rate applied to other income, leading to a higher overall tax liability.
Progression Clause Calculator →R
Riester-Rente (Riester Pension)
A state-subsidized private pension plan. Subsidized through allowances (€175 basic + €185-300 per child) and/or tax deduction (max. €2,100/year). The own contribution is 4% of gross income.
Riester Pension Calculator →S
Solidaritätszuschlag (Solidarity Surcharge)
A 5.5% surcharge on income tax. Since 2021, ~90% of taxpayers are exempt thanks to a threshold (2026: €18,130 income tax for singles). High earners continue to pay the full surcharge.
Solidarity Surcharge Calculator →Sozialversicherung (Social Insurance)
Germany's system of five mandatory insurance branches: health insurance (~14.6% + supplementary), long-term care (3.4%), pension (18.6%), and unemployment (2.6%). Contributions are split equally between employer and employee.
Steuerklasse (Tax Class)
Categories for calculating monthly wage tax. Class I: singles. Class II: single parents. Class III/V: married (unequal income). Class IV: married (similar income). Class VI: second job.
Tax Class Comparison →U
Umsatzsteuer (VAT / Value Added Tax)
A consumption tax on goods and services. The standard rate is 19%, reduced rate 7% (e.g. food, books, public transport). Businesses collect and remit the tax but do not bear it economically.
VAT Calculator →W
Wohngeld (Housing Allowance)
A government rent subsidy for low-income households. Since the Wohngeld-Plus reform, significantly more households qualify in 2026. The amount depends on income, rent, household size, and the municipality's rent level.
Housing Allowance Calculator →Z
Zu versteuerndes Einkommen (Taxable Income)
The tax base for income tax. Calculated from gross income minus work-related expenses (Werbungskosten), special expenses (Sonderausgaben), extraordinary burdens, and tax-free allowances. The progressive tax rate is applied to this amount.