Basics of Income Tax
Income tax is a tax on earnings from dependent work, which includes the Vocational Training Compensation (Ausbildungsvergütung). It is directly withheld by the employer and paid monthly to the tax office. Since income tax is deducted directly from earnings, employees typically do not have to make a separate advance payment on income tax.
Income Tax as a Component of Income Tax
Legally, income tax is not an independent type of tax but a special form of collecting income tax. It only applies to income from employment, which includes the earnings of trainees. The amount of income tax is based on the taxable income and the employee’s tax class.
Tax Classes and Their Importance
Income tax is calculated based on the employee’s tax class. In Germany, there are six tax classes, which are assigned depending on marital status and additional criteria. The tax class affects how much income tax an employee has to pay:
- Tax Class I: Unmarried employees without children
- Tax Class II: Single parents
- Tax Class III: Married employees whose spouse does not earn an income
- Tax Class IV: Married employees whose spouse also works
- Tax Class V: Married employees with a higher income from their spouse
- Tax Class VI: Employees with multiple jobs
Allowances and Tax-Free Income
When calculating income tax, certain allowances are taken into account, which reduce the taxable income. These include:
- Basic Allowance: In 2025, it is €10,908 annually and ensures that income up to this amount remains tax-free.
- Flat Rate Deduction for Employment Expenses: €1,230 annually
- Flat Rate Deduction for Special Expenses: €36 annually
As long as the annual income of the trainee does not exceed the basic allowance, no income tax is due.
Collection and Remittance of Income Tax
The employer is legally obliged to directly withhold income tax from the employee’s gross salary or gross compensation and remit it to the tax office. The employee thus receives the net salary, which has already been reduced by the tax deductions. This method ensures that the tax burden is evenly distributed over the individual months.
Role of Income Tax in Tax Returns
Although the income tax has already been remitted by the employer, the employee can reclaim any overpaid taxes by submitting a tax return. This is particularly the case when income was not consistently earned throughout the year (e.g., when starting training during the year) or if there are high deductible employment expenses.
Important Notes on Income Tax
Income tax ensures consistent and immediate taxation of income from dependent employment. For trainees, it is usually only relevant if the Vocational Training Compensation (Ausbildungsvergütung) exceeds the basic allowance. Trainees should regularly check their payslips to ensure that the correct tax class has been applied and that no excessive deductions have been made. In case of doubt, filing a tax return offers the opportunity to reclaim overpaid taxes.