Shocked at how much income tax I'm paying

so, as a munich resident, I love this city and country. Who couldn't at least like a country that allows you to wear lederhosen and dirndls all day every day? Now, there are some things that I do miss from America namely this: LOW INCOME TAXES or at least low when compared to what I just got taxed on my first out of university paycheck EVER.

I understand, health insurance and that ppl don't mind paying the higher taxes here because of all that is provided for them blah blah blah. But, as an american who is earning a small paycheck as it is (praktikantin), I was shocked to see more than half of it gone in taxes. Namely the lohnsteuer tax which btw no one told me that I needed to declare a tax bracket, I thought that considering the amount you make per month it should be a given that it is calculated as such, not automatically taxing you as a 6. So, now I'm freaking out because not only can I maybe ONLY pay for my rent and a few other things, I don't know how I'm going to pay for the other musts such as, oh I don't know the $200 a month I owe for student federal loans (which I now have to get reconsolidated), my 40€ monthly train ticket, the 1500€ i owe back to my parents for having paid my apt deposit, my cell phone bill etc.

Besides going to the kreisveraltungs referat and getting my lohnsteuer karte in the applicable tax bracket, HOW do I get used to this? It seems so normal for my colleagues but according to how much I would be making monthly, I might as well move home.

Um... might wanna file this in the Things To Determine Before You Take a Job And Move Abroad category.

In any job, in Germany or America, it's generally wise to scope out ahead of time how much you will NET each month ('net' meaning what you will take home after taxes, just to make sure we're clear) so you can budget accordingly. I'm afraid there is nothing you can do after the fact other than ensure you're in the correct tax class and try to keep your expenses down.

i know that i can get geld from my parents...that isn't the problem. the main question is, how do you get used to seeing 1/2 your paycheck disappearing to things that you'll never personally (besides health insurance) benefit from? great good, yeah ok whatev, think outside p.c. answer

You do get benefits from the taxes you pay. They pay for roads, public transport, police and fire services, etc. etc. etc. Sure they're higher than the US but they're lower than some other places. No way to 'get used to it', it's just one of those things that's only coming as a shock to you because you made the mistake of taking a job in a foreign country where you were totally uninformed about the current tax rates.

Sorry if I'm appearing unsympathetic, but that's because I am 100% totally unsympathetic.

In that case they probably won't mind if they have to wait a bit longer for the money you currently owe them - that's at least one thing off your mind.

You're a Praktikant, right?
Will you be here a full tax year (Jan-Dec)? You may be able to claim some tax back if you come under the taxable income bracket, which is what I personally did all those years ago when it was still all grass around here.

But hang on... you're a Praktikant and a graduate? You're no longer enrolled on a course?

If you are enrolled at a university, contact your local student office as you may be able to switch health insurance to special rates or offset some tax. Likewise, if you are a member of a student organisation like AIESEC, contact them.
Alternatively DAAD may have advice.

But yes, finding out in advance might have been an idea.

I was informed on the taxes, but to my understanding the less you make, the less taxes you get taken out. I knew that it is supposed to be up to 46% of taxes taken out if you make more than 50.000€...i DON'T make that much. Thus, I know it's because I've been put in tax class 6 which is where all the lohnsteuer charges come from. My main question was, how, as an american, do you get used to the system so it's not such a shock.

Also, if no one has advice, please do not make a snippy comment. It really doesn't help.

Tax Class VI is emergency tax as you had no tax card, you'll go back down to Class I (single person) pretty quick which is a lower tax bracket. Speak to your HR department about arranging that and also about applying for the refund, you may however not get this extra tax back until the end of your contract.

Make sure you register at the KVR and get your card before your next pay check!! Otherwise that tax band will never change.

thank you katrina. i'm sorry if i'm being really Mrs. Debbie Downer, but with everything that I just budgeted in expenses, this is not going to make it. Which, as many would hopefully be able to relate to.

I got caught out on that when I first moved to Munich as well. They offered my a job to top the money I was making in Mannheim teaching - unfortunately their offer was brutto and I told them what I made netto (as a student then I hadn't dealt with taxes for my set up).

They knew I'd been "underbought" and I had to fight long and hard to get pay raises to a fair enough salary. The only way to get used to it was to accept it - under about 50,000 or whatever yeah- you pay less taxes, but in tax class one you take home 60% of your salary, tops.

I once fought really hard for a 200 DM a month raise, and ended up with 400 DM a month less due to the new tax bracket

Live and learn, part of the joys of life.

Tax Class 6 (Steuerklasse VI) is an emergency class when you've not given your employer a valid tax card (Lohnsteuerkarte). Every cent you earn will be taxed. As a single person (I presume) you should be in Tax Class 1 which gives you an allowance before taxes are applied. In class 1 you can earn €7664 per year before taxes are applied, so that means the first €638 per month will be tax free, adding around €250 to your net pay, even before you claim any additional allowances. As soon as you give your employer the tax card they can backdate and refund excess tax paid so far...

I don't think that's actually possible, is it? I'm no expert in German taxation but I thought it was similar to in Canada where your extra earnings may land you in a higher tax bracket but the higher tax is only applied to the income that puts you in that bracket. Maybe I was misinformed.

You don't get used to it. Taxes, plus the other contributions you make are higher. Period. Like you, I include all the stuff like health insurance, pension contributions, etc. as a part of my income tax (because that is how it is classified in the US- though the health insurance contributions are not made to cover your health care- they are for Medicaid and Medicare). So yes, income tax contributions are considerably higher compared to home. Germany is a social state.

You can reclaim your pension contributions if you are here for less than 5 years..at least that is something back.

Got it. So we are pretty much saying that GG was being unnecessarily biting to a newbie (and fellow yank) when all they really needed was a little helpful advice to sort out the incorrect tax, and set them happily on their way?

YL6 is correct, I came in under the limit, claimed Class VI back and worked tax-free after getting (with help from my HR dept) a declaration that my income was limited to a 6 month placement as an obligatory part of a degree and would come under the tax limit for the whole year.

But you do have to actively apply, it is not automatic.

exactly...that wasn't nice esp when someone is in distress and sees their futures in munich as well as general independence taking a serious step back.

JE, I had to step in. You didn't get here quick enough. Gettin slow, old man.

JE's post had a plural pronoun in it, if I'm not mistaken. You are of course entitled to your opinion but please don't answer on behalf of everyone else.

Today, and for today only, I am the "Newbie Superhero" fighter. I shall defend their cause at every opportunity in the next 24 hours. Even tedious questions about personal tax that should be answered by your own HR department.
No newbie shall be left in the field on my watch.

p.s. Normal service will be resumed tomorrow 11am.

Thank you for saving me Newbie Superhero. But, may I reiterate. I was asking for advice on how to EMOTIONALLY get used to the taxes. I know what to do with my HR dept etc.

'How to emotionally get used to the taxes'

Nokareyes, maybe start a support group for fellow tax sufferers?

Well, from where I am sitting it doesn't sound like you need to get EMOTIONALLY used to 50% taxation. It sounds more like you need to speak to your HR Department and not be paying the 50% tax, and therefore NOT be dealing with any emotional stress.

Poor diddums, having to cope with decent public services, all on her own!

What JE said. Get your tax code changed! Then the only emotional problem will be dealing with all the beer you will be able to afford with the extra net income.

If it's any consolation: the tax that you pay in germany more than offsets the taxes that you would normally have to pay in the States (as an American citizen).

Also consider the fact that Germany's health care system is ranked 25th in the world (according to the World Health Organization), while the US's is ranked 37th.

Here's the deal. If you are a short-timer, young, single, and healthy, then German taxes are a complete rip-off. Your money is being redistributed to the aged, the unhealthy, the prolific baby-makers, and (still) East Germany. That being said, as you get older, have kids, and eventuallly put kids through college, you begin to cash in on the system.

Think how much it costs to have a baby in the States, or pay for Medical care for kids. Here, it's (mostly) free. If you''re only gonna be around a year or two, you'll be paying lots into the system without getting the benefit (other than a top-notch infrastructure).

mmm but low income tax on a crappy paid job is also bollox innit,be happy you don't need to work 3 jobs just to survive

Maybe GG was a little quick off the mark but I didn't realise it was a class 6 emergency tax issue until post # 7.

Dear Nokareyes, YOU are at fault becasue YOU didn't submit all the correct paperwork and therefore you go on emergency tax...just like in loads of other countries too. Get yourself down to the KVR and get the correct paperwork for your HR Department: ASAP. Go tomorrow at 0730!

If you are on class 1 tax then, coupled with social security deductions, you are going to be paying a total of around 46% anyway.
When you smell the coffee, bring me one as well: Strong, black and bitter, like my boyfriends.

Exactly. Well, I currently pay about 41%. The point is that even after the OP gets the tax class situation fixed (which was an avoidable situation to begin with) the taxes will still be higher than in the US. And as a foreigner it may seem like you don't get any benefits, and I've occasionally griped about it myself. But now that I see myself as more of a long-term resident, I have gained a better understanding of what my taxes 'buy' me and that helps takes the financial sting away.

Oh yeah and I was prepared for it. Sorry but I just can't help pointing that out again.

You don't. You make sure that you present your employers with a Lohnsteuerkarte. Simple.

When's it due?

Don't jinx me, you bastard.

There is already a big one. It´s called "Bund der Steuerzahler".

60% tops? Sorry but balls:

http://www.guckmal.de/loh_net1.htm

Oh 'ek, the balls are in the air...

One really good tool for working out gross/net income is the karriere.de Gehaltsrechner
Now, even with a silly expensive state health insurance plan at 13,9% (and I'd suggest the OP contact HR before she gets stuck with something very expensive or find out if student rates apply) but *without* church tax (please tell me you aren't paying that one), 2000€ a month comes out at 1308,34€ in tax band I, aged 23-45, no company pension (check!), no kids and is unmarried, resident in Bavaria and has a tax card.
Makes 34,58% deductions, you keep 65,42%.
Handy link that (if you pay tax that is).

I continue to be a little baffled by the posts on the high tax rates, since we here in the northeast US seem to be paying nearly the same in taxes. I keep wondering what I am missing. As a married couple in our early 40's w/ one dependent, the percentage of taxes we pay from our adjusted brutto is:
federal 20%
state 8.5%
local 4% (school/town/roads/etc)
sales 2.5% (local rate is 6% on everything but basic food and prescription/OTC meds)

These percentages do not include our health insurance premiums and copays (my health insurance premium is based on how many hours I work...not my salary!) which are another 8-12% of our brutto dependening on whether we make any significant claims in a year.

As well, all of our "necessary" services have significant taxes embedded: phone, heating fuel, electricity, etc.

How are we not close to the 45-50% when one adds the health insurance costs?

@Fransceco,

In Europe we do not include sales tax (VAT) into our calculations about personal tax. In the UK people we also leave out the council tax (local tax) as well: it is a property tax - not every one is paying it. Also you have not included the non-taxable allowance nor have you included all the tax deductables that are on offer in the USA. I am no expert but as far as I am aware the USA has a very complex tax code - so in the end you need to compare effective income related tax rates to get a meaningful comparison.

On that basis, if we compare the UK to Germany - on a Middle Class Wage. I would be receive 65% of my wages whilst in Germany I am looking at 55% net. This position changes if you are married with Children and then Germany reaches nearer to, if not the same as the UK. So considering we are paying 17.5% sales tax as well and goods in Europe (compared to the USA) are, I think, more expensive and or part of the family budget - Taxes in Germany are a ripe of!!!

In Germany you also pay stupid taxes like Church Tax (1% I think) (if you are dumb enough to declare a religion), unemployment tax (3 to 4% I think) (which they stole back with Harz IV), and solidarity tax for the East Germany (4.5% I think) (as they decided in the 90s to turn the East into a subsidy monkey!)...

Making a gestimate about in terms of the GNP consumed by the government plus Health Care. I would expect the effective tax rate to come out at about 30% to 35% in the USA compared to 45% in Germany or the UK...

As for the question about getting used to it - you do NOT. You leave, you work in Switzerland as I do, you work in the UK as I did...but you do not work in Germany!!!

You only live once, you only have one chance to provide for your family...the Government taking 42 to 48% of your salary is scandalous and then for good measure making goods a 5th more expensive...is day light robbery...

Stanford the flat tax fan...
Roll on Switzerland - I am paying 19.5% at the moment..(and public services work well here*).

* I have to admit I am not sure if thats because the Swiss subsidize the populous with all that dirty money being made in the Swiss banking system...but eh that is another debate...

Exactly; you can't compare the Swiss and German taxation systems. If you think the taxes are high here, take a look at Scandinavia. No-one likes paying taxes but, as with everything in life, you get what you pay for. America may have lower taxation but it also has tens of millions of citizens who can barely afford to put food on the table or receive medical care. Britain, meanwhile, is an absolute dump, so I'm very happy with what the extra taxation in Germany provides.

Sorry but there is not necessary a correlation with the amount spent on Health Care and whether or not everyone is covered or treated. The USA pays around 14% and Germany 12.5%. The difference is on how they organise their Health Care: private Insurance system compared to Public Insurance system. Also in the US, despite myths given off by Michael Moore and the European left, the poor and elderly get treated via the Public health insurance. It is the middle class or working poor that have problems...i.e. navigating private health care contracts... finding affordable health care...dealing with copayments etc.

Finally,...money going to a government DOES not mean it is well spent...so again more does not always mean more...

You can compare the German and Swiss systems...who says you can't - especially as I had a chance to pay my taxes in Germany or Switzerland...and I do not need to say which one is getting my money...

Stanford the flat taxer...

Sure Standford, 25% flat rate tax might work out. But on ALL income, for EVERYBODY. NO write offs.

You can't compare the German and Swiss systems because, as you pointed out yourself, Switzerland earns billions each year through banking. I also believe that a flat tax may be a fair solution, but Switzerland doesn't have a low tax rate because it is using a flat tax.

@MonksTown,

Yeah I agree - but I would like to take a lot of the poor out of the tax system all together. What absurb system in the UK which means the poor pay taxes and then go cap in hand to the government for stupid credits and hand-outs...

That would be great sight putting a lot of those tax avoidance accounts out of a job...I think it is one sacked letter that you would also like to see!!!

@SmallTownBoy,

Maybe Switzerland does or doesn't - as the corporation tax rates are pretty low as well...what share of the government budget comes from corporation tax I will have to check. Anyhow, Estonia and Lavitia have flat rate taxes and then do not earn billions from banking so the flat rate and low taxes concept does not rely on having a successful banking industry...

Ultimately you mabe right in Switzlerand is not true flat tax but it is flatter than Germany...a stab in the right direction.

No, but then the flat tax rates in those countries are generally higher (up to 33%). The top rate of income tax in Switzerland is apparently 45.5%, compared to 42% in Germany.

@SmallTownBoy,

Yeah flat tax rates do not necessary mean super lower taxes - that comes with slimming down government or making it more efficient (the other side of the coin).

As for your last point...

I have only been here 3 months and I already know it depends on the Canton so you can not talk about 42.5 highest tax rate for Switzerland as each cantons decide their own income taxes and some have flat or nearly flat income tax rates. Swychz where I am is famous for its one and believe me I am only paying 19.5% (income tax and pension) on all my income! It is pretty amazing really. Money in the bank each month... 14.5% income tax...

Stanford

Ultimately the rate of income tax in a flat tax regime will depend on whether corporation tax is included in it and how much the Government decide to move on to indirect taxes. So by itself it is not a low tax system - that comes also from the details of implementation.

stanford-
I think this is part of my point. The supposedly "low" US taxes are not really all that low, especially for a middle income family w/fewer deductions in the admittedly complicated tax code, if one begins to look at both indirect and direct taxes.

But thanks for your answer, and advancing my greater understanding.

That is right but most Europeans will compare personal or direct taxes exc. local taxes and on that basis the USA comes out better. In addition, the indrect taxes are higher in Europe: sales taxes average 17.5% and tax on petrol we pay a duty which means the petrol at the pump includes a aprx 85% costs (I think) that goes to the government. I must admit I do not know the price of petrol despite driving Munich to Switzerland every week but I can imagine that our prices are 3 times what they are in the USA and all the difference in price goes to the Government coffers.

So yes you have in direct taxes as well but overall the amount of GNP that the government consume in Europe (inc. Health Care) is around 42 to 45% on average. There are some countries like Sweden that consume 49 to 51%. That means they have to raise the money accordingly. In the US, the figure is nearer to 37% so on that basis I would guess even with all the indirect taxes you are still paying less than us here. (US Health care is whole can of worms in itself - go Hilary C!)...

I should stop as I am sounding like a mad professor explaining and going on about tax. Anyhow, hope that helps a little and next time you are at the pumps think of us over there.

Stanford - ashamed not to know the price of petrol!!!