The income tax rate determines the income tax you pay. The income tax scale in 2021 is as follows:
- Your taxable income remains tax-free up to the amount of the basic allowance. The basic tax-free amount in 2021 is €9,744 for single persons and €19,488 for married persons.
- From a taxable income of € 9,745 for single persons and € 19,489 for married persons, the tax rate is 14 % (entry tax rate).
- If your taxable income exceeds € 57,919 (single) or € 115,838 (married), the tax rate is 42 %.
- From a taxable income of € 274,613 for single persons and € 549,226 for married persons, the tax rate is 45 % (top tax rate).
If your taxable income includes extraordinary income, you can claim tax concessions under certain conditions. 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 accrues 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, you can apply for a reduced tax rate once in your lifetime in the case of the sale or closure of a business 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%.
- § 32a Income Tax Act (EStG)
- § 34 EStG