Financial Terms Glossary
The most important financial terms - with simple and concise explanations.
Progressive tax rate
The progressive tax rate describes the principle of the German income tax: as taxable income rises, the tax rate also rises. This means that higher incomes are taxed at a higher percentage than lower ones.
The basis is always the so-called taxable income, which is shown on the tax assessment notice. It determines which tax rate applies.
Two values are relevant here:
- The marginal tax rate shows how heavily an additionally earned euro is taxed.
- The average tax rate indicates which proportion of the total taxable income is actually paid as tax.
The individual income tax can be calculated using the Federal Ministry of Finance's calculation tools (BMF).