What is the marginal tax rate?

The marginal tax rate indicates the rate at which each additional euro earned is taxed.

As income tax in Germany is progressive, the tax rate increases with higher income. Therefore, not all income is taxed at the same rate.

Example: 

If you receive a salary increase of 1.000 Euro, the marginal tax rate shows how much tax is due on this additional amount. If your marginal tax rate is 35%, you will pay approximately 350 Euro in income tax on the additional 1.000 Euro.

Conversely, a reduction in income also affects the marginal tax rate: If you earn 1.000 Euro less, the tax is reduced by approximately 350 Euro.

Important: The marginal tax rate applies only to the additional part of the income. It is therefore usually higher than the average tax rate, which describes the tax burden on the entire income.