Germany Payroll Tax Guide (Lohnsteuer 2026)
A guide to the German payroll tax (Lohnsteuer) withholding system. The employer uses ELStAM to retrieve your tax class, church tax status, and children electronically, then withholds Lohnsteuer, Solidaritätszuschlag (5.5% of Lohnsteuer), Kirchensteuer (8%–9% of Lohnsteuer), and all four social contributions (RV, KV, PV, AV) from gross pay. Total payroll deductions typically range from 35% to 50% of gross salary. The employer also pays their share of social contributions directly.
Germany's payroll system is one of the most comprehensive in the world. The employer acts as a tax collector for the state, deducting Lohnsteuer (wage tax) and all social contributions before the employee receives their net salary. The system is fully digitalised through ELStAM. For related reading, see our Social Security Guide → and Tax Classes Guide →.
How ELStAM Works (Elektronische Lohnsteuerabzugsmerkmale)
- Digital tax features: ELStAM replaces the old paper Lohnsteuerkarte. When you start a new job, your employer queries the ELStAM database using your Steuer-ID (tax ID). The system returns your tax class (Steuerklasse I–VI), church tax status (Kirchensteuermerkmal), number of children, and any allowances (Freibeträge) or additional deductions.
- Employer responsibilities: Your employer must retrieve ELStAM data at the start of employment and whenever a relevant change occurs (birth of a child, marriage, divorce, church membership change). The employer uses this data to calculate monthly Lohnsteuer using the official Lohnsteuertabelle (wage tax table).
- Employee changes via ELStAM: You can request changes to your tax class (e.g., after marriage) or apply for Freibeträge through ELStAM online at www.elster.de. The Finanzamt updates the database, and your employer sees the change automatically in the next payroll run.
- Tax class impact on withholding: Tax class I (single, no children) has the highest withholding. Class III (married, higher earner) has the lowest. Class V (married, lower earner) has the highest. Class VI (second job) has the highest rate with no allowances. Choosing the optimal combination affects monthly cash flow.
Breakdown of Payroll Deductions (Abzüge vom Bruttogehalt)
- Lohnsteuer (wage tax): Calculated from the official Lohnsteuertabelle based on your monthly gross pay, tax class, and ELStAM data. It is the largest single deduction for most employees. The amount withheld approximates your expected annual income tax liability.
- Solidaritätszuschlag (Soli): 5.5% of the Lohnsteuer amount. Since 2021, ~90% of employees pay no Soli due to the increased exemption threshold. The Soli is fully phased out for ~96.5% of taxpayers by 2026, but still applies to high earners (income above ~€18,130 single / €36,260 married of annual Lohnsteuer).
- Kirchensteuer (church tax): 8% (Bavaria/Baden-Württemberg) or 9% (all other states) of Lohnsteuer. Only deducted if you are a registered church member in the ELStAM database. Can be avoided by formal Kirchenaustritt.
- Social contributions (Sozialversicherung): ~20% employee share (RV 9.3% + KV ~8.75% + PV 1.8%–2.4% + AV 1.3%), capped at the respective Beitragsbemessungsgrenzen. The employer pays a matching share directly (not deducted from your salary).