Understanding tax · Jurisdiction DE

Marginal and average tax rates

The average rate divides tax by income. The marginal rate applies to the next euro on the tariff.

In more detail

The two numbers are not the same. A higher marginal rate on the next euro does not mean the whole income is taxed at that rate. The German tariff is in section 32a of the Income Tax Act and is adjusted. Finmon does not run the formula and names no personal rate.

Background

The OECD compares the burden on labour across countries, often as a tax wedge of tax and contributions. That is a statistic for stylised cases, not a tax return. Your rate is set by the tax office in the assessment, not by an international table and not by Finmon.

An example

The first slices of income attract less tariff tax than a later extra euro. Divide all the tax by all the income, and the average sits below the rate on the last euro. Finmon does not calculate this example with real amounts.

A common misconception

The marginal rate is the rate on the whole salary.

It applies to the next euro on the tariff. The average sits below it while earlier slices of income are taxed less heavily.

Source: EStG § 32a. Last reviewed: 2026-10-29. Editorially reviewed on 2026-10-29. Next review 2027-10-29. Version 0.2.0. Finmon explains. It does not advise. Not investment, tax or legal advice.