Germany is the Europe’s biggest economy and one of the richest countries in Europe. It is wealthy not only in GDP per capita terms but also in terms of average personal income. The country is famous for its affluent middle class, generous welfare system, free healthcare and education, clean environment, public safety and generally fair and even distribution of wealth. Therefore, Germany is also highly regarded for its great quality of life.
Average Gross Salary in Germany
An average gross salary in Germany in 2017 was 3,770 euros a month for full time employees (self-employed, part-time jobbers and people with very low income below the taxable level were not included in these statistics). That is around 45,000 euros a year gross (before income tax and social contributions). The minimum wage in Germany is currently just under 1,500 euros a month which is 18,000 euros a year.
Major differences in income levels still exist between the East and the West. The average salary in the old federal states is about 25% (or 800 euros a month) above the average in the new states. That is, employees in the former East Germany earn on average around 3,000 euros a month (excluding the city state Berlin because Berlin is not considered one of the new federal states). Employees in the southern federal states – Hessen (capital Wiesbaden), Baden-Württemberg (Stuttgart) and Bayern (Munich) – have the highest average wages whereas those in the new states – Mecklenburg-Vorpommern (capital Schwerin), Sachsen-Anhalt (Magdeburg) and Brandenburg (Potsdam) – have the lowest salaries. In fact, employees in the federal state Hessen earn on average 55% more than their counterparts in Mecklenburg-Vorpommern.
Furthermore, German men earn on average nearly 21% more than women. There are also differences in income levels between the regional capitals (and large cities in general) and rural areas but these are less significant than differences between men and women or between the old and new federal states. By far the biggest difference is in Bayern (the federal state of Bavaria) where the average salary drops by 7% when excluding the capital Munich from the state’s average.
Average Salaries in Germany by Profession
|Who earns how much||Euros a year|
|Waiter (tips not included)||21K|
Personal Income Tax
Germany has a rather complicated taxation system and personal income taxation is no exception. There is a progressive personal income tax rate starting from zero and ending at 45% for high-income individuals earning more than 260 thousand euros a year. The tax rates 42% and 45% are flat within their respective brackets whereas within the 9,001-54,949 euro bracket the tax rate rises geometrically from 14% to 42% (see below).
Personal Income Tax Rates in Germany for 2018
|Singles (EUR)||Married Couples (EUR)||Tax Rate|
|0 – 9,000||0 – 18,000||0%|
|9,001 – 54,949||18,001 – 109,898||Starting at 14% and geometrically increasing to 42%|
|54,950 – 260,532||109,899 – 521,064||42%|
|Above 260,533||Above 521,065||45%|
There is also an additional type of income tax, the so-called solidarity surcharge of 5.5%, which comes on top of the regular income tax but is not paid in full or at all by low-income individuals. That is, individuals who pay less than 972 euros a year in taxes are exempt from the solidarity surcharge while for those who pay between 973 – 1,340 euros in annual taxes the solidarity surcharge increases geometrically from zero to 5.5%. Solidarity tax was introduced in 1991 as a temporary measure to help finance the costs of German unification and despite hefty criticism in recent years there still are no immediate plans for removing it.
Moreover, a church tax, which is either 8% or 9% (depending on the federal state) of taxable income, is payable by all registered church members in Germany. To confuse you even more, the amount paid as church tax is fully tax deductible. A foreigner who does not wish to pay a church tax in Germany should never mention their church affiliation in any official document (e.g., in residence registration). Otherwise, Roman Catholics and Protestants will most likely need a written proof (a certificate) that they quit the church in order to avoid paying the German church tax.
The German personal income tax law allows for a number of tax deductions, both related and non-related to taxable income, such as training and commuting expenses, dual household costs, work-related insurance costs, contributions to voluntary health insurance and pension schemes, church tax and a variety of expenses related to bringing up children (e.g., childcare, school fees).
Personal Income Tax Calculation: Examples
This example may give you an idea of how much you would have to pay in taxes if you lived in Germany. A person who has an average German gross salary of 45 thousand euros per year, is single and is not a registered church member (pays no church tax) earns a net salary just under 28 thousand euros per year. However, if that person had a spouse who earned significantly less, their net salary would be over 31 thousand euros a year. Using the same example but a gross annual salary of 60 thousand euros, the person’s net income would be 35 thousand and 40 thousand euros, respectively. Likewise, at 80 thousand euros a year the difference in net salary would be 45 thousand versus 52 thousand euros. To estimate your potential net salary you can try one of many German gross-net wage calculators available on the internet (e.g., this one).
Cost of Living in Germany
Germany’s price level is generally in line with the EU average. That is, life in Germany is less expensive than in the neighbouring Luxemburg, Switzerland, Denmark, Belgium and even France and Netherlands, or in the Nordic states (Norway, Sweden and Finland), but it is more costly than in Spain, Portugal or Greece. Monthly living costs in Germany are usually estimated at 850 euros (sometimes at 750 euros for international students). This is approximately the monthly amount you will need to prove you have for the duration of your stay when applying for a certain type of visa (e.g., study visa, jobseeker’s visa).
Rent is the single biggest cost, which is not surprising considering the density of population in Germany. Home ownership in Germany has been traditionally relatively low in the past as most people used to live in rental apartments. This has changed recently as many Germans fearing stability of their currency and encouraged by low interest rates bought properties. In addition, Germany has experienced a sharp increase in net immigration since 2010 which lead to an increased demand for properties. As a result, property prices have seen a steady growth over the past six years. The rents have risen less than property prices but their growth has accelerated recently.
However, rents vary wildly depending on the location. A small studio flat can cost as little as 400 euros a month including utility bills in a small town but well over 1,000 euros in central Munich. Likewise, rent for a two bedroom apartment can be as low as 650 euros a month (including utilities) but as high as 2,000 euros. Generally, 700 euros a month should be enough money to rent a studio flat (including utility bills) and 1,200 euros a month to rent a mid-sized two bedroom flat (85 square metres) in a decent location in most parts of Germany. Currently, the average apartment rent in Germany is nine euros a month per square meter (excluding utilities). Read this report (though not the latest one but still a very good general overview) for a lot more information on the residential rental market in 29 major German cities to get a better view on the variation in rents throughout Germany.
Security Deposit and Compensation Fee
When renting a flat, it is necessary to factor in further expenses other than simple rent. A tenant will be typically asked for a security deposit (usually worth one month’s rent but it can be up to three months) and a broker fee equal to one month’s rent if they use a real estate agent. In addition, rent is usually paid in advance (always at the beginning of each month) and it is not uncommon to be asked to pay Ablöse (compensation for investment made by the previous tenant). This can be up to several thousand euros if the previous tenant made significant improvements in the flat. Hence, the new tenant pays Ablöse to the outgoing tenant rather than to the landlord. It is common that tenants make small improvements in the rented apartment such as installing lighting and buying their own furniture (sometimes even the whole kitchen including a cooker, fridge, dishwasher and sink).
Just like rents, German property prices vary significantly between regions and towns. For example, the average apartment price per square meter in the formerly heavy-industrial Dortmund (the eighth largest German city with a population of 600 thousand located in Western Germany) is around 1,700 euros. Compare this with nearly 7,500 euros per square meter in notoriously expensive Munich (the capital of the southern federal state of Bavaria and the third largest German town with a population of 1.5 million. It goes without saying that a new or newly renovated apartment in one of Munich’s prime locations will cost you a lot more than 7,500 euros per square meter. But, as of April 2018, the average price per square meter to buy an apartment in Germany was 3,100 euros. Thus, 3,100 euros per square meter should buy a decent apartment in most parts of Germany.
Germany’s public transportation system in and around towns is extremely reliable, efficient and reasonably priced, especially if you buy discounted monthly, quarterly or yearly travel cards. Commuting costs are tax deductible and that is also true when using one’s own car. When doing a tax return, people driving their own car to work can deduct 30 cent per kilometre whereas one litre of gasoline and diesel cost around 1.40 and 1.25 euros, respectively (as of May 2018). Used cars in Germany are among the least expensive in Europe.
Food, Clothing and Other Costs
Your monthly expenses on food will largely depend on your lifestyle, whether you like eating out or making your own meals. In general, food prices in supermarkets are very reasonable in Germany. In addition, large German employers offer meals at a reduced price in their own canteens. Likewise, clothes can be bought very cheap in Germany. However, some foreigners may find prices of certain services such as private childcare, dry cleaners, hairdressers or residential parking quite high when compared with prices in their home country.
Check out these helpful resources for cost of living in Germany (rents, prices of goods and services) and for international and regional comparisons:
Salaries vs Cost of Living in Germany
- A single person on minimum wage will bring home 1,100 euros a month which is 250 euros above the average monthly cost of living in Germany.
- A single person earning the German average salary of 3,770 euros a month makes 2,300 euros netto which is almost three times the average cost of living.
- A single nurse earning the average gross salary for a nurse in Germany of 2,900 euros a month makes at least 1,850 euros netto which is 1,000 euros above the average cost of living for a single person.
- A specialist doctor having the average gross salary in his branch of 7,000 euros a month earns 3,900 euros after tax and that is well over four times the average cost of living in Germany.
These are just a few examples to illustrate what some German salaries are really worth. When doing your own comparisons do not forget that the average cost of living in Germany varies mainly due to differences in rent so that the same salary will buy you significantly less in fancy places like Munich than in less affluent parts of Germany.