Tax Progression 2025 – Simply Explained
Tax progression is a core principle of the German tax system: The higher your income, the higher your tax rate.
What is tax progression?
Tax progression means the tax rate increases with rising income. Germany has a progressive tariff with different zones.
The 5 Tax Zones 2025
| Zone | Income Range | Tax Rate | Description |
|---|---|---|---|
| Zone 1 | €0 - €12,096 | 0% | Basic Allowance |
| Zone 2 | €12,097 - €17,443 | 14% - 24% | Lower Progression |
| Zone 3 | €17,444 - €68,480 | 24% - 42% | Upper Progression |
| Zone 4 | €68,481 - €277,825 | 42% | Proportional Zone I |
| Zone 5 | From €277,826 | 45% | Top Tax Rate |
Marginal vs. Average Tax Rate
Marginal tax rate: The rate applied to the next euro earned.
Average tax rate: The overall rate on your total income.
Example:
At €50,000 income: - Marginal rate: 32% (on the last euro) - Average rate: 19.8% (on total income)
You do NOT pay 32% on the entire €50,000!
Why tax progression?
Tax progression follows the ability-to-pay principle: Those who earn more can contribute a higher percentage to public goods without being restricted in their lifestyle.
Cold Progression
Cold progression occurs when wages are only adjusted for inflation but tax rates aren't. This pushes taxpayers into higher brackets despite unchanged purchasing power.
Calculate now: To Tax Calculator