What is the average tax rate?

The average tax rate indicates what percentage of your taxable income you pay as income tax in total.

It is calculated by dividing the income tax by the taxable income.

Example:

Your taxable income is 40.000 Euro. The income tax amounts to 7.200 Euro.

7.200 Euro ÷ 40.000 Euro × 100 = 18 %

Your average tax rate is therefore 18 %. This means that for every 100 Euro of taxable income, an average of 18 Euro goes to the tax office.

Important: The average tax rate applies to the entire income. It is usually lower than the marginal tax rate, which indicates the tax on an additional Euro earned.