You Don't Pay 42% Tax in Germany: What's Actually Leaving Your Payslip

There is a sentence you will hear within your first month of working in Germany, usually from someone who has just opened their Lohnabrechnung: „They take 42% in tax.“ The frustration is real and the arithmetic is roughly right — a large slice of your gross salary does vanish before it reaches you. But the word tax is doing something dishonest in that sentence, and it is worth taking apart, because most of what disappears is not tax at all and does not behave like tax.

Two different 42%s that keep getting confused

The reason this myth is so sticky is a coincidence. There are two separate numbers hovering around 42, and they mean completely different things.

• The Spitzensteuersatz — 42%. This is a rate of income tax. In 2026 it applies to taxable income above €69,879 for a single person (double that for jointly assessed couples). It contains no health insurance, no pension, nothing else.
• Your total deductions — often near 40%. This is what actually leaves your payslip: income tax plus the four social-insurance contributions. It is a different quantity that happens to land in the same neighbourhood.

Say „42%“ and most people hear the second thing while quoting the first. And here is the part that makes the confusion almost inevitable: at roughly the salary where the 42% tax bracket begins, your total deductions really are somewhere close to 42% — but only about half of that total is tax. Two numbers, nearly identical, doing entirely different jobs.

„Taxable income“ is not your salary

The €69,879 figure trips people up because it is measured on zu versteuerndes Einkommen — taxable income — and that is a much smaller number than your gross salary. Your pension and health contributions are deducted before the tax is calculated, along with a standard allowance for work expenses. So a single person needs somewhere in the region of €85,000–90,000 gross before their taxable income even reaches the 42% line. Exactly where depends on your Steuerklasse, whether you have children, and whether you pay church tax.

And 42% is not the ceiling either. Above roughly €278,000 of taxable income a 45% rate — informally the Reichensteuer — takes over.

So what is actually taking the money?

The bulk of it is Sozialversicherung: Germany's statutory social insurance, made up of five branches. These are not taxes. A tax goes into a general pot and you have no personal claim on it. A social-insurance contribution buys you a specific entitlement — a pension, medical treatment, care, income if you lose your job. It is closer to a compulsory subscription than to a levy.

Here is the whole system, with the employee share of each 2026 contribution rate. Your employer pays in alongside you, roughly matching what you pay:

• die Rentenversicherung — pension. 18.6% total, so 9.3% from you.
• die Krankenversicherung — health. 14.6% plus an average 2.9% Zusatzbeitrag, split evenly: about 8.75% from you.
• die Pflegeversicherung — long-term care. 3.6% total (4.2% if you are childless and over 23). The employer's share is fixed at 1.7%, so you pay about 1.9%, or 2.5% without children. Saxony splits it differently.
• die Arbeitslosenversicherung — unemployment. 2.6% total, so 1.3% from you.
• die Unfallversicherung — accident at work. 0% from you. The employer funds this one entirely, which is why you will never find it on your payslip.

Add up the employee side and you land at roughly 21–22% of gross. That is the part of the missing money that was never tax — and, unlike tax, every euro of it is buying you something with your name on it.

This is on the citizenship test

None of the above is trivia. The Leben in Deutschland test — the one you sit for naturalisation — checks that you understand how the system is structured, and several questions in the 300-question catalogue deal with exactly this. They are not asking you to recite rates; they are asking whether you know what belongs to what.

Notice the pattern the test is drilling. Every one of these questions is about category membership — what counts as statutory social insurance and what does not. Learn the five branches as a set and you have answered a whole family of questions rather than memorising three separate facts.

The takeaway

Next time someone tells you Germany takes 42%, both halves of the sentence deserve a correction. The 42% tax rate almost certainly does not apply to them — it starts near €70,000 of taxable income and only bites the euros above it. And the money that genuinely is missing from their payslip is mostly not tax: it is roughly 21–22% of statutory insurance, matched by their employer, buying a pension, healthcare, care cover and unemployment protection with their name attached.

Rates change most years, and your own numbers depend on your Steuerklasse, children and church-tax status. For your actual figure, run your gross through a Brutto-Netto-Rechner rather than trusting any headline percentage — including the ones in this article.