The income tax rate determines the income tax you have to pay. The income tax rate in 2022 is as follows:
- Your taxable income remains tax-free up to the amount of the basic allowance. The basic tax-free amount in 2022 is €10,347 for single persons and €20,694 for married persons.
- From a taxable income of €10,348 for single persons and €20,696 for married persons, the tax rate is 14% (entry tax rate).
- If your taxable income exceeds € 58,597 (single) or € 117,194 (married), the tax rate is 42 %.
- From a taxable income of € 277,826 for single persons and € 555,652 for married persons, the tax rate is 45 % (top tax rate).
If your taxable income includes extraordinary income, you can, under certain conditions, claim rate relief. The reason for the rate reduction is the progressive tax rate, which leads to a higher tax burden in the case of an inflow of combined income in one year. Extraordinary income includes, in particular, income that is received on a one-off basis (e.g. compensation payments, employee severance payments, compensation payments to self-employed commercial and insurance agents, business capital gains and certain income from a multi-year activity). For the taxation of extraordinary income, the five-percent rule is generally applicable.
Alternatively, in the case of the sale or termination of a business, you can apply for the application of a reduced tax rate once in your lifetime if
- You have reached the age of 55, or
- You are permanently incapacitated for work within the meaning of social insurance law, and
- if your capital gains do not exceed €5 million.
The reduced tax rate is 56% of the average tax rate on the total taxable income (including income subject to the progression proviso), but at least 14%.
Legal basis:
- § Section 32a Income Tax Act (EStG)
- § Section 34 EStG