Does Germany use progressive tax brackets?

Yes, Germany uses a progressive income tax system where higher portions of income are taxed at higher rates. This means your effective (average) rate is always lower than the top bracket rate. For 2024, the income tax brackets start at 0% for income up to €11,604. From there, rates gradually increase. For example, income between €11,605 and €66,760 is taxed progressively from 14% to 42%. The 42% rate applies to income up to €277,825. If you earn above €277,825, a “wealth tax” (Reichensteuer) of 45% kicks in for the portion of income exceeding that amount. So, if you earn €300,000, only the €22,175 above €277,825 is taxed at 45%. This keeps your overall effective rate significantly lower. You also need to factor in the solidarity surcharge (Solidaritätszuschlag), which is 5.5% of your income tax. For most, this is waived if your annual income tax liability is below €18,130 (for single filers). Also, church tax (Kirchensteuer) of 8% or 9% of income tax applies if you are registered with a church. The takeaway? Even with a 45% top marginal rate, your actual tax burden in Germany will be much lower than that, especially with generous allowances and deductions.