Wage tax is deducted from wages. Wages are all income that accrues to the employee from the employment relationship or from a previous employment relationship. Income includes not only cash remuneration, but also remuneration in kind (e.g. board and lodging) and other benefits of monetary value (e.g. private use of a company car). It does not matter whether the income is one-off or ongoing, or whether there is a legal entitlement to it. It is also irrelevant under what name or in what form the income is granted.
Wage tax is calculated on the basis of wages in such a way that it corresponds to the income tax owed by the employee if he/she earns income exclusively from employment.
To make it easier for the employer to calculate the tax, employees are placed in different tax classes according to their marital status. The respective tax class determines whether the basic income tax rate (tax classes I, II, IV) or the income tax splitting rate (tax classes III, V) is to be applied and which allowances and lump sums are to be taken into account. These are the employee lump sum of 1,230 euros (2022: 1,200 euros) per year (tax classes I to V), the special expenses lump sum (tax classes I to V), the pension lump sum (tax classes I to VI) and the relief amount for single parents of 4,260 euros (2022: 4,008 euros) per year (tax class II).