Many employees fear that a salary increase will ultimately lead to less net income. But this assumption is a myth, because more gross basically means more net. Only in special cases can it happen that there is no more of the higher income left in the wallet.
A salary increase never leads to less net income
From a mathematical point of view, it is impossible for the net salary to decrease after a salary increase, as n-tv.de emphasizes. The misconception often arises from confusing marginal and average tax rates. While the average tax rate applies to the entire income, the higher marginal tax rate only applies to the additional portion of income. The previous income is therefore not subsequently burdened more heavily. A salary increase always ensures that there is more net leftover at the end of the month.
The progressive tax system
Germany has a progressive tax system. As income increases, the tax rate also increases, but only for the additional portions of income. So anyone who slips into a higher tax progression will have to pay a higher percentage on the additional income, but will still benefit from the lower tax rate on the basic income. This freedom often leads to misunderstandings and, according to the General-Anzeiger Bonn, is the cause of the common misconception “more gross equals less net”.
Additional services as a cost trap
The situation is different if the higher gross income is also associated with monetary benefits. As echo24.de reports, a company car or a subsidy in the form of benefits in kind can reduce net income. These additional benefits are considered income and increase the tax and duty burden. The net salary then appears lower, even though the gross salary has formally increased.
Social benefits under scrutiny
Another scenario in which employees have less money at their disposal despite a salary increase arises from the loss of state support. If your income exceeds certain limits, benefits such as housing benefit or child allowance may no longer apply. Even a few euros more gross can lead to the loss of eligibility and the overall financial situation to worsen, according to echo24.de.
Tax reform 2025
The 2025 tax reform will provide relief for many employees, primarily by increasing the basic tax allowance. Those who earn less benefit more because a larger portion of their income remains tax-free. This mitigates the so-called cold progression, as it goes on to say. However, not everyone benefits, because calculations by the German Economic Institute (IW) show that single parents and singles in particular can actually be worse off due to increasing social security contributions and higher CO2 costs.
Editorial team finanzen.net
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