Income tax is deducted from wages. Wages are all income received by the employee from the employment relationship or from a previous employment relationship. Income includes not only cash remuneration, but also benefits in kind (e.g. board and lodging) and other non-cash benefits (e.g. private use of a company car). It does not matter whether it is a one-off or ongoing income 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 only earns income from employment.
To make it easier for the employer to calculate tax, employees are assigned to different tax brackets depending on 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 EUR 1,230 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 EUR 4,260 per year (tax class II).
Note
You may also be interested: What tax brackets are there?