Taxes are deducted “from the source” in Germany (directly from the gross salary) and the fact to do a tax declaration each year helps you get some money back, if it seems that you’ve paid too much during the fiscal year . Unlike France, for example, financial coverage in case of incapacity to work and supplementary pension are not automatically deducted from the gross Germany.
The payroll sum and income tax in Germany are close to 42% of the gross salary. This value is considered among the highest ones in the world. Here are some tips to optimize this net / gross ratio:
1- Register a “Freibetrag“ on your Lohnsteuerkarte for immediate deduction for commuting expenses: the distance from your workplace to your home can be deducted from your income at 30 cents per kilometer. For more info, check my article about Taxes Declarations in Germany (How To)
2- Switch to private health insurance: if you are single, young and healthy (or married and you both work), subscribe to the private health system can afford to pay less than in the public system while enjoying better coverage.
3- Keep an eye on your tax class: the fact of marrying a person with no or little income will greatly increase the net wage. Try to find the best combination of your tax classes.
4- Aim and negotiate a “détaché” contract in Germany where the target net wage is set and where taxes are paid partly by the employer.
5- Pension programs: Some company have interesting offers like spending 100€ from your gross salary and saving 90€ (as an example only) for your pension. The point here is: taxes deducted from the 100€ are 42%, means if you keep this amount in your net salary and save it later, you will lose 27€ per month in “unnecessary taxes”.
6- Finally, for the pros: renovate a building in tranches absorbing renovations costs which result in an increase of value of the property. Renovations funded by a fine-in credit paid by the increase based rents, while enjoying state subsidies. When it’s a private assembly and you plan to resale it after more than 10 years, you may get a total tax exemption.
I tried to sum up those best practices gathered through some internet surfing about this topic in those pieces of advice and then share it with you guys. But keep in mind that they do not replace the recommendation of a specialist. If you find my article helpful, think of sharing it to help people facing the some situation from your network :-)