The Tax bracket is a Lohnsteuer deduction characteristic used for employees to calculate the amount to be withheld Income tax is taken into account. The Einkommensteuer Act distinguishes between tax brackets I to VI.
What is a tax bracket?
Employees are allocated to a tax bracket for the purposes of the 1TP3 deduction. The relevant tax bracket is determined by the statutory requirements and may depend, amongst other things, on marital status, entitlement to the tax relief for single parents, or the existence of multiple employment contracts.
The tax bracket affects the amount of Wage tax withheld from your wages during the year. However, it does not, on its own, determine the final Income tax for the entire calendar year.
What tax classes are there?
- Tax bracket 1: in particular for single employees as well as other persons who do not meet the conditions for other tax brackets
- Tax bracket II: for employees for whom the tax relief amount for single parents is to be taken into account
- Tax bracket III: especially for certain married employees in conjunction with the spouse's tax bracket V
- Tax bracket IV: basically for married employees, provided both spouses meet the statutory requirements and are not permanently separated
- Tax bracket V: in conjunction with tax bracket III of the spouse
- Tax bracket VI: essentially for the wages from a second or further employment relationship
For spouses, the tax class combination IV/IV with factor can also be chosen under the statutory conditions.
What role do ELStAM play?
The tax class is one of the electronic 1TP3 deduction characteristics (ELStAM). Employers retrieve the Lohnsteuer provided for the deduction electronically ELStAM and take the tax bracket contained therein into account during payroll accounting.
In addition to the tax bracket, the ELStAM may contain further characteristics, such as a factor, the number of child tax allowances, tax allowances or additions, and characteristics for church tax deduction.
Tax bracket and taxable gross – what is the difference?
The Gross taxable income refers to the taxable earnings. The tax bracket, on the other hand, is a personal Wage tax deduction criterion that is taken into account when calculating Wage tax.
In short: Gross taxable earnings refer to taxable wages, and the tax bracket is one of the factors that determines how the ongoing Lohnsteuerabeduction is calculated from them.
Does the tax bracket change the final Income tax?
The tax class initially affects the ongoing Lohnsteuer deduction during the calendar year. The final Income tax, on the other hand, depends on the overall tax situation of the respective year.
Different tax brackets can therefore lead to varying monthly deductions, without this alone allowing any conclusions to be drawn about the final annual tax.
