You pay income tax on all the income for one calendar year – in your case, this will probably correspond primarily to your salary. If you are an employee of a company, you do not even have to trouble yourself with the question of income tax at first, as your employer will automatically deduct the income tax from your gross salary in the form of wage tax (Lohnsteuer) and transfer it to the tax office on your behalf. You can see how much your employer transfers and how much your net salary amounts to every month from your pay slip.

In Germany, everyone’s salary is subject to what is known as a “basic tax allowance”. Up to this amount, your income is not subject to tax. Currently, this tax allowance is 8,004 euros a year if you are not married. For married couples, it stands at 16,008 euros. You pay income tax on all income above this amount. The taxation rates vary from 14 percent to 45 percent. The rule is: the higher your income, the higher the rate of taxation. However, the top tax rate of 45 percent is only payable on incomes of more than 250,730 euros a year if you are unmarried. For married couples, the maximum tax rate is applicable for incomes of over 501,460 euros.

The German government aims to relief the tax burden on married couples and parents in particular. This is why the amount of income tax you pay does not just depend on your income. Family situations are also taken into account – for example, if you have children, you pay less tax. To put this into practice, all taxpayers are divided up into various income tax brackets (Lohnsteuerklassen):

Tax bracket 1: If you are single and have no children, you fall into tax bracket 1. The same applies to married people who have separated and live apart, and to divorced people.

Tax bracket 2: This tax bracket applies to single parents who live alone; the government also grants them a higher tax allowance.

Tax bracket 3: Married employees can choose this tax bracket if one of the spouses does not work or earns considerably less than the other. The fact that the other spouse falls into tax bracket 5 means that they pay less tax.

Tax bracket 4: If both spouses earn more or less the same amount, this tax bracket is better for them.

Tax bracket 5: This tax bracket is only open to married employees whose spouse (who earns more) falls into tax bracket 3.

Tax bracket 6: This applies to all those who do not have a wage tax card (Lohnsteuerkarte) for a second or third job, etc. This corresponds to the highest tax rate.

At the end of one calendar year, you can ask the government to check whether you have paid too much income tax.

To do so, you submit your income tax declaration to the tax office. With your figures on your actual income and financial charges, the government is able to check whether you are entitled to a refund. It usually worthwhile filling in the tax declaration form: according to the data of the Federal Statistical Office, nine out of ten taxpayers received a refund. On average, they received refunds of around 800 euros.

You can collect the tax declaration forms from your tax office, or download them from the tax office Web site and print them out. You also have the possibility of making your tax declaration online, at www.elster.de. If you are obliged to hand in a declaration of income, for example, because you have chosen tax brackets III/V, the declaration must arrive at the tax office by the end of May.

In the tax declaration, you state how much you earned in the past year and how much income tax your employer transferred on your behalf. Your employer will supply a statement of these figures at the start of each year. You should then enter these figures in your tax declaration.

Certain costs will lower the amount of tax you pay. You should also enter these in your tax declaration. They include, for example:

• Expenditure for moving house for professional reasons
• The costs of applying for jobs
• Travel to work
• The costs of private pension schemes

For many kinds of expenditure, it is important that you should keep copies of receipts as proof, and that the costs were incurred between January 1 and December 31 of the year in question.

You can also ask a tax consultant or – a less expensive alternative – an “income tax assistance association" (Lohnsteuerhilfeverein) to fill in your income tax declaration. If your financial situation is complicated, that can do more than just spare your nerves. While it is true that tax experts do not work for free, they are very well-acquainted with the numerous rules and regulations.

If you prefer to deal with your tax declaration yourself, the tax office or the help and FAQ pages on the Elster Web site can answer your questions. Elster is an electronic form with which you can send your tax declaration to the tax office online. For fuller advice, you can also go to an “income tax assistance association" (Lohnsteuerhilfe­verein) which will provide advice free of charge or fill in your tax declaration form for you. Another alternative which is open to you is to buy a piece of computer software. This kind of programme guides you through the tax declaration and at the end, all you have to do is print it out.