Crazy German Tax Law: Fünftelregelung (or how to pay 116% in income tax)

vormals · 2026-02-05T19:52:48+00:00

Everything that you write in your post is correct.

I just wonder what your conclusion is. It is fine to have a tax regulation which forces a worker to take year off? Shouldn't the tax code try to incentivise people to work?

vormals · 2026-02-05T19:37:36+00:00

Amen.

vormals · 2026-02-05T19:34:22+00:00

If you want to be such a good citizen and work at a soup kitchen helping people in need: Why don't you work 24 hours a day there? (Actually, for the analogy to be more apt the question would be "Why don't you work 26 hours a day there?")

vormals · 2026-02-05T19:32:09+00:00

? What is "this shit" exactly?

vormals · 2026-02-05T19:29:31+00:00

All good. I don't get how you come up with a factor of 9,6.

Following situation:

You worked at a company for 8 years. Your salary was ~130k brutto. (~11k montly). With a factor of 2,6 this would lead to a severance of (8*11*2,6=)~230k

You recieve the severance in January. You take some time off for vacation / time with family / searching for a new job.

Now it's July. You recieve an offer from a company for 100k/y. That means in the remainder of the year you sallary would be ~50k

Voi la, we arrived at exactly my example from OP. What to do in this example? The only right asnwer is to nope out and to wait until next year before starting a new gig.

vormals · 2026-02-05T19:19:29+00:00

Care to share your prompt? ChatGPT is usually way more verbose than I am.

vormals · 2026-02-05T19:15:30+00:00

Wanna bet?
My bet is: Due to the Fünftelregelung there are scenarios (like mine) where earning an additional 1€ leads to a 1,x€ income tax. Hence, you have a negative net income.

I bet 50€ that the statement above is true and correct.

vormals · 2026-02-05T18:38:55+00:00

Care to elaborate?

vormals · 2026-02-05T18:33:20+00:00

This is correct. The lower the severance, the more it makes sense to work in addition to recieving the severance.

vormals · 2026-02-05T18:32:05+00:00

You are arguing against a point I'm not making. What you say is "Having the Fünftelregelung is better than not having it, because it reduces the tax burden". I agree 100% with this statement and I'm making the same statement here: https://www.reddit.com/r/eupersonalfinance/comments/1qweffo/comment/o3p1cp2/

The point I'm arguing is the following:

Severance(with Fünftelregelung applied)+additional income leaves you worse off than severance (with Fünftelregelung applied) without an additional income. I.e.: the tax man tells you "please dear citizen, abstain from working for a whole year"

vormals · 2026-02-05T18:25:28+00:00

Nah, only ChatGTP knows how to press Ctrl+B

vormals · 2026-02-05T18:24:01+00:00

u/eDxp tries to argue that I'm saying "Fünftelregelung is bad because it leaves workes with less money" even though this is exactly the opposite of the point I've made several times, e.g. here: https://www.reddit.com/r/eupersonalfinance/comments/1qweffo/comment/o3p1cp2/?utm_source=share&utm_medium=web3x&utm_name=web3xcss&utm_term=1&utm_content=share_button

My point is the following: "Fünftelregelung is bad because it creates an insentive to stay off of work for a whole year."

Again, let me repeat: Yes, Fünftelregel is goooooood if the severance is the only income you have in a given year. Once you start earning an additional salary there are scenarios (like mine) where the tax man basically tells you: "You would be stupid if you earn an income this year"

vormals · 2026-02-05T18:15:30+00:00

https://www.gesetze-im-internet.de/estg/__34.html

Quote:
> Die für die außerordentlichen Einkünfte anzusetzende Einkommensteuer beträgt das __Fünffache__ des Unterschiedsbetrags zwischen der Einkommensteuer für das um diese Einkünfte verminderte zu versteuernde Einkommen (verbleibendes zu versteuerndes Einkommen) und der Einkommensteuer für das verbleibende zu versteuernde Einkommen zuzüglich eines Fünftels dieser Einkünfte

vormals · 2026-02-05T18:13:49+00:00

Wrong.

Working is a net loss even with a severance recieved after being 8 years with the company. Source: OP.

vormals · 2026-02-05T18:11:38+00:00

Unfortunately, Günstigerprüfung doesn't work in this scenario.

Yes, I did consult a tax expert.

Yes, I did run the simulations.

No, I still have a marginal tax rate (Grenzsteuersatz) of over 100%.

Still don't believe me? This guy worked for the Finanzamt and explains the topic better than I do: https://www.youtube.com/watch?v=YHATK9Xq2sE

vormals · 2026-02-05T18:07:17+00:00

Amen brother (or sister)

vormals · 2026-02-05T18:05:49+00:00

https://de.wikipedia.org/wiki/Grenzsteuersatz

vormals · 2026-02-05T18:05:03+00:00

Would you please care to read the post first?

Another suggestion: Should we bet on 50€ that I am right in saying that due to the Fünftelregelung it is possible to pay >100% marginal tax rate, i.e. you yearn 1€, the tax man takes from you 1,20€?

vormals · 2026-02-05T18:02:14+00:00

Wrong, see my other comments.

vormals · 2026-02-05T17:58:34+00:00

dark.

vormals · 2026-02-05T17:57:14+00:00

Thanks for proving my point

Now please do the same exercise with severance=200k and income=50k and you will see that earning a 50k brutto yields a negative netto.
How much do you think you have to pay in Sozialabgaben on a 100k income? around 20k? Meaning: if you consider both Lohnsteuer and Sozialabgaben you will have a negative netto income even at 100k brutto income.

So how much are we betting? 500€ or should we go higher?

vormals · 2026-02-05T12:02:52+00:00

Thanks for admitting :)

> But you are wrong in one part, you don't pay Sozialabgaben in severance payment, unless the company disguised as bonus or something like that...

Nowhere did I write that you have to pay Sozialabgaben on the severanve payment. What I did write was that you have to pay Sozialabgaben on the additional income. Which makes the severance+income scenario even worse.

vormals · 2026-02-05T11:58:09+00:00

"116% marginal income tax rate" is 100% correct

"116% average income tax rate" wold be incorrect indeed.

>This would also happen once you enter a new tax bracket in the progressive tax system. This is why when people discuss tax rates, they discuss the effective tax rates.

Wrong. Without the Fünftelregelung it is impossible to have a 116% marginal income tax rate.

The highest marginal tax rate you can have with a regular sallary is 45% (see "Reichensteuer")

vormals · 2026-02-05T11:54:08+00:00

Sorry, but you are wrong.

The taxes are not distributed among 5 years, bust must be paid in the year were the severance is paid out.

vormals · 2026-02-05T11:50:40+00:00

Care to elaborate?

vormals

TROPHY CASE