How to determine your tax rate based on your income

How to determine your tax rate based on your income

According to a report by www.focus.de, many citizens can look forward to high wage increases this year, with wage increases averaging almost six percent. The average salary of all those subject to pension insurance this year was 45,358 euros. The Federal Ministry of Finance provides figures on the various income groups, from low earners to the really rich in Germany. Economists define someone as rich if they earn at least three times the average income.

According to the report, people with an annual income of more than 279,324 euros are classified as top earners. This group comprises around one percent of the population and pays almost a quarter of all income taxes. The “rich tax rate” of 45 percent applies to single people with an income of 277,826 euros per year.

Tax rates in Germany increase with gross income. The entry tax rate is 14 percent up to 16,179 euros, followed by a progression phase from 16,180 to 63,514 euros and a top tax rate of 42 percent from 63,515 euros. The tax rate for the rich is 45 percent from 277,826 euros. However, not all income earners are obliged to pay taxes, as the basic allowance of 11,604 euros per year is exempt from income tax.

Given this information, the high wage increases in the current year are likely to have a significant impact on income distribution and tax revenues. In particular, increasing the basic tax allowance could have a positive impact on consumer spending and thus on the economy as a whole. In addition, the higher tax rates for top earners are likely to lead to an improved distribution of the tax burden. Overall, these developments signal potentially strong purchasing power and tax revenues that could have a positive impact on the market and the financial sector.