The income tax is one of the most important sources of income of most countries. In 2014, the German state collected 200 billion Euros through income tax, which corresponds to around one third of the total revenue of the German state. \n As a self-employed person, you have to pay income tax to your respective tax office once you exceed the tax-free allowance of currently 10.347 € (2022), just as every legally defined "natural person". For self-employed persons, the whole process is however much more complicated than for employees. This is because as an employee, you will simply get a tax class attributed to you by the tax office and taxes are already deducted from your pay slip before the money will be transferred to your account at the end of each month. \n As a self-employed person, you don’t automatically fall into different tax classes. 

The income tax is calculated on the basis of your annual profits. This often leads to confusion and self-employed people having to pay extra horrendous sums, which sometimes even jeopardizes their self-employment. As a freelancer, it can also sometimes be hard to know exactly how many contracts you will win per year and how much profit they will generate in advance - how can you calculate your income tax in advance like this? 

And then there is a bunch of factors that make the whole process of knowing how much exactly you need to pay for income tax even more complicated. Even tax accountants sometimes encounter problems when trying to stay up to date of all the provisions and new laws. \n How then can you ensure that you handle the calculation of your income tax correctly? What factors do you need to take into account? And do you necessarily have to go the long and expensive way to a tax accountant to get a first estimation?

That’s why we developed a special tool for you, with which you can calculate an estimate for your income tax rate by simply answering a couple of questions. Even though our calculation can of course not replace the exact estimation of a tax accountant, you can use the taxator rate to get an approximation for the money you have to put aside for your tax savings - it’s a relatively fair indicator for your income tax rate. 

Of course, it will get even more precise once you adapt it with time, which will allow you to get a clear picture of how much of your earnings are safe for you to spend. We estimate that the taxator can calculate an accurate benchmark for income tax rates of around 80% of the self-employed in Germany.

In order for the taxator to estimate your tax burden, you first need to feed it some information that will determine how high your tax rate will be.

The most important question first concerns your expected turnover for this tax year. Due to the progressive tax system in Germany, your tax rate varies with the amount of your income. Once you have exceeded the exemption amount of 10,347 € in income for 2022, a percentage will be applied to your income that you will have to pay to the tax office, with the entry tax rate currently at 14% and the top tax rate at 45%. Therefore, it is important to determine in the first step approximately how much you will earn in this tax year.

If you can't predict exactly how much you will earn, it's best to use last year as a reference and, if in doubt, add a little extra, as optimism at this point leads to more conservative tax estimates. This way, you won't end up paying too little at the end of the year and may even be able to enjoy some savings.

What are your business expenses (monthly)?

Furthermore, we would like to know how high your monthly business expenses are. Because these ultimately reduce your profit and can thus be deducted from the tax and reduce your tax amount. These are all expenses that arise from your business activities, such as your rental expenses for a coworking space, or an office, expenses for leasing, purchase of a new computer, telephone and Internet costs, advertising costs, vehicle costs, goods or raw materials, contributions, fees or insurance (health insurance is not included here), external services and employees, meetings in the restaurant, travel expenses, business outfit.

If you are not sure of the total cost, try putting a number next to each of these items. Some expenses also depend on your specific activity and for some expenses it is up to the tax office whether they accept them as business expenses or not. With time, however, you get more and more familiar with these issues.

If you are at the beginning of your self-employment, you should inform yourself well about what you can deduct from the tax and not include the uncertain candidates for the time being until you know better what the tax office allows and what not.

There are increasingly more people who are self-employed and work as employees on the side. Or you own real estate or other investments that provide you with additional income. This question is about this income, because it is also decisive for your income tax rate.

Which god you pray to is irrelevant here. However, the taxator needs to know if you are a member of a church organization. Why? As a member of a church, you usually support it with a financial contribution. This financial contribution is called church tax in Germany and is transferred to the state together with your income tax.

The church tax is collected by the tax offices of the federal states and is assessed on the basis of income tax and property tax. For our assessment, we take the conservative estimate of 9%, so we can make sure you don't set aside too little (in some states, the tax rate is 8%).

If you are married or in a registered civil partnership, you can benefit from spousal splitting, which means that your taxable income is divided equally between both of your incomes. This can save you quite a bit of tax, especially if the income to be split is very far apart. For this reason, you should also type in to the taxator how much your partner will earn this year in order to ensure a better assessment.

You can deduct parts of your pension contributions from your taxes. Since 2022, the maximum amount that you can deduct from your retirement provision is 25,639 €. The contributions paid then have a tax-reducing effect of 94%.

Of course, this question also belongs to the repertoire of basic questions for the calculation of your tax amount. If you have children, you are doing good for the state and society, and this should be rewarded. So, the more children, the lower your tax amount. The whole matter is measured by the child allowance or the child benefit and has a certain effect on your tax rate, although not significant.

Once you've answered these questions, you've set the cornerstones for calculating your income tax rate and can hear the taxator purring away as it calculates your income tax rate.

Due to the fact that in the German tax system, the inflow principle applies, the tax is only calculated on the amount that has actually been credited to your account.

So if you would be confronted with a significantly higher tax rate due to a larger invoice, you can consider to issue the invoice only in the following year. And to make this kind of calculation easier for you, you can use the taxator and enter different values for your income.