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 (BMF).