Why is PF deducted from salary

What is actually all about the gross salary?

The difference between gross and net wages is and remains the eternal nuisance of working society. Every month, various amounts are deducted from the salary without ever reaching the employees' accounts. However, this is not just a matter of taxes; other benefits are also due.

But what exactly is behind it? What is going away from the gross wage? How is the net wage calculated?

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What exactly is going on from my gross salary?

Did you know that? Almost 20% percent of your gross salary goes towards social benefits. Income tax, which is calculated on the basis of the wage tax bracket, is also deducted. Your tax exemptions also depend on the tax class.

The tax bracket is largely based on your family situation and also changes when you start a second job. You can find more detailed information about the individual tax brackets in our tax lexicon under income tax brackets.

This will be deducted from your gross wage:

 

The question now arises: How high are these deductions?

The following numbers and percentages for the various deductions have been in effect since January 1st, 2020.

social benefits

Almost 20% of the gross salary is deducted for social benefits. However, this is only the employee's share that you pay yourself. Your employer also pays the same percentages, so the total is twice that amount. The services are made up as follows:

  • Pension insurance: 9.3% (a total of 18.6% with the employer's contribution)
  • Unemployment insurance: 1.2% (2.4% in total with the employer's contribution)
  • Long-term care insurance: 1.525% for employees with children, this amount increases to 1.775% for childless employees (a total of 3.05% or 3.3%)
  • Health insurance: 7.3% (a total of 14.6% with the employer's contribution)
    Cash registers also collect additional amounts, which must then also be divided in half.

 

Taxes

In addition to the social benefits, taxes are also deducted from the gross salary, this is what is known as income tax.

  • The initial tax rate is currently 14%. This is the lowest tax rate that is used on taxable income just above the basic tax allowance.
  • From a taxable income of EUR 57,052 the top tax rate of 42% applies, for 2021 the limit is EUR 57,918.00. Double the value applies to married couples.
  • Due to the so-called tax on the rich, there has been a further tax rate since 2007, which is still above the top tax rate of 42%. For 2020, a tax rate of 45% must be applied from a taxable income of more than 270,501 (2021 EUR 274,613) or for married couples EUR 541,002 (2021 EUR 549,226).
  • The solidarity surcharge is up to 5.5 percent of income tax; it is levied if the income tax is more than 972 euros per year or 1,944 euros in the case of joint assessment and increases gradually so that the full amount is only payable if the annual income tax is 1,340 euros or 2,680 euros.
    But there is really good news about this: Since the beginning of 2021, the solidarity surcharge has been canceled for around 90% of taxpayers. Specifically, this means that up to a taxable income of approx. 61,717 euros no more solidarity surcharge has to be paid. The amounts double for spouses.

 

Gross salary vs. net salary - what is left of the gross salary?

You can easily answer this first question with our gross-net calculator. This enables you to determine your net income conveniently and free of charge.

Another question also arises: What else do I have to consider to determine my net income?

  • Capital accumulation benefits: You will receive this in addition to your normal wage; Capital-forming benefits paid by the employer are subject to tax and social security contributions. The taxes and duties due will be deducted from your wages.
  • Pecuniary advantage: If you receive extra remuneration from your employer, you must also pay tax on this (as a pecuniary benefit). This applies, for example, to the company car that you also use privately or to vouchers or subsidies. The statutory exemption limit is currently 44 euros per month. However, not all special services are affected.
  • Age relief amount: For taxpayers over 64 years of age there is an age relief amount, i.e. a small tax benefit.
  • Allowances: These must be applied for directly from the tax office and depend on the respective tax class. There are exemptions, for example, if you are completing an apprenticeship or looking after relatives or children.

Do you still have questions about the gross and net salary? Or on other tax issues? Then contact your personal tax expert at the Aktuell Lohnsteuerhilfevereins e.V .: Find a counseling center now.

Or use ours Extra service of contactless online advice including ALH Postbox app, with which you can do your tax return from the comfort of your home.