German Severance Tax Optimizer (Fünftelregelung, bAV, Rürup)
Compare four ways to tax a German severance in 2026 — one-fifth rule, January timing, bAV conversion and a combined Dispojahr strategy — and see which keeps the most money.
Since Jan 2025: you claim the Fünftelregelung yourself
Tax year 2026
Your severance
€
The lump-sum severance before any tax.
Single (Grundtarif)
yr
€
Approximate taxable income (zvE) for the payout year — salary already earned plus expected further taxable income, after allowances. Not gross salary. For joint filers, include your spouse's taxable income here.
Church tax
Nordrhein-Westfalen (9%)
Only used to set your church-tax rate (8% in Bayern and Baden-Württemberg, 9% elsewhere).
These already have sensible defaults, so all four scenarios show without opening this. Scenario D is the Dispojahr strategy — model a clean gap year by leaving next-year income and next-year ALG I at 0.
€
Annual ALG I received in the payout year. Tax-free itself, but it raises the tax rate on your severance (Progressionsvorbehalt).
€
Taxable income in the following calendar year. Often near 0 if you'll be unemployed, or a later-start new salary. Drives the January-payout scenario.
€
Annual ALG I in the January-payout year (Progressionsvorbehalt for the deferred scenario).
€
Amount already paid tax-free into an occupational pension under the Vervielfältigung rule this year. Reduces the remaining tax-free cap.
€
How much you'd pay into a Rürup (Basisrente) contract in the payout year. Deductible up to the §10 cap, lowering your taxable income. Leave at 0 to switch this strategy off.
Recommended strategy
Defer to January saves you €14,100 vs taking it now
Net cash now: €50,000
Compare the four strategies
| Strategy | Total tax | Net cash now | Moved to pension | Effective rate |
|---|---|---|---|---|
Take now | €14,100 | €35,900 | €0 | 28.2% |
Defer to January Recommended | €0 | €50,000 | €0 | 0% |
Convert to bAV | €2,653 | €6,787 | €40,560 | 5.3% |
Combined (Dispojahr) | €0 | €9,440 | €40,560 | 0% |
Take now
Total tax
€14,100
Net cash now
€35,900
Moved to pension
€0
Effective rate
28.2%
Defer to January
Recommended
Total tax
€0
Net cash now
€50,000
Moved to pension
€0
Effective rate
0%
Convert to bAV
Total tax
€2,653
Net cash now
€6,787
Moved to pension
€40,560
Effective rate
5.3%
Combined (Dispojahr)
Total tax
€0
Net cash now
€9,440
Moved to pension
€40,560
Effective rate
0%
Where your severance goes
Each bar sums to your gross severance.
Take now
Net cash now
72%
Total tax
28%
Defer to January
Net cash now
100%
Convert to bAV
Net cash now
14%
Moved to pension
81%
Total tax
5%
Combined (Dispojahr)
Net cash now
19%
Moved to pension
81%
Zusammenballung (income concentration): met — Fünftelregelung applies
| Item | Calculation | Amount |
|---|---|---|
| Income tax (Fünftelregelung) | 5 × [ESt(€35,000) − ESt(€25,000)] | €14,100 |
| Total tax on the severance | €14,100 |
Zusammenballung (income concentration): met — Fünftelregelung applies
| Item | Calculation | Amount |
|---|---|---|
| Income tax (Fünftelregelung) | 5 × [ESt(€10,000) − ESt(€0)] | €0 |
| Total tax on the severance | €0 |
Zusammenballung (income concentration): not met — taxed normally
| Item | Calculation | Amount |
|---|---|---|
| Taxable severance after bAV | €50,000 − €40,560 | €9,440 |
| Tax-free bAV portion | min(€40,560, €50,000) | €40,560 |
| Income tax (normal taxation) | ESt(€34,440) − ESt(€25,000) | €2,653 |
| Total tax on the severance | €2,653 |
Zusammenballung (income concentration): not met — taxed normally
| Item | Calculation | Amount |
|---|---|---|
| Taxable severance after bAV | €50,000 − €40,560 | €9,440 |
| Tax-free bAV portion | min(€40,560, €50,000) | €40,560 |
| Income tax (normal taxation) | ESt(€9,440) − ESt(€0) | €0 |
| Total tax on the severance | €0 |
This calculator is for informational purposes only. It does not constitute financial advice.
German severance tax calculator. Tax on your Abfindung under the Fünftelregelung, plus three more ways to lower it.
A German severance tax calculator works out the income tax on your Abfindung under the Fünftelregelung and compares four ways to pay less. It adds Solidaritätszuschlag (Soli) and Kirchensteuer where they apply, then names the option — one-fifth rule alone, a bAV pension conversion, a January payout or a Dispojahr gap year — that leaves you with the most money.
How Germany Taxes a Severance (Abfindung)
A severance in Germany — an Abfindung — is fully taxable as ordinary income, but it is not subject to social-security contributions: no health, care, pension or unemployment insurance is deducted from it. The catch is the income tax. Because the whole payment lands in a single calendar year, it stacks on top of whatever else you earned that year and can shove part of it into the 42% top bracket, which for 2026 begins at €69,879 of taxable income. On a large payout it is easy to lose a third or more to the Finanzamt.
Germany's answer is the Fünftelregelung (one-fifth rule) in §34 EStG. Instead of taxing the whole severance at your top marginal rate, the tax office pretends you received it in five equal slices. It works out the extra tax that just one-fifth of the severance would add to your other income, then multiplies that figure by five. When your other income is low and the severance is large, spreading it this way keeps more of the payment in the lower tax zones and the saving can run into thousands of euros. When your income is already at the 42% ceiling, a fifth still lands at 42%, so the rule saves nothing — a nuance most single-purpose calculators gloss over.
Since 1 January 2025 there is a second twist that makes this tool matter now. Under the Wachstumschancengesetz (Growth Opportunities Act), employers may no longer apply the Fünftelregelung in the monthly payroll. They now withhold the full wage tax as if the severance were an ordinary bonus, and you only recover the relief by claiming it yourself in your income-tax return (Anlage N). Millions of people who used to get the break automatically now personally own the decision — and the timing, pension and gap-year choices that decide how large the break actually is.
This calculator models the whole picture the incumbents leave out. It layers the Fünftelregelung together with a bAV pension conversion, payout timing, a Dispojahr, the Progressionsvorbehalt from unemployment benefit, and a Rürup contribution, then shows all four resulting strategies side by side with the Solidaritätszuschlag and Kirchensteuer already included.
How to Use the German Severance Tax Calculator
You need four numbers to get a full four-strategy result, and the tool fills sensible defaults for everything else so a comparison appears the moment the page loads.
1. Gross severance (Abfindung). The lump sum before any tax — for example €50,000. This is the figure the whole comparison is built on.
2. Filing status. Single (Grundtarif) or married filing jointly (Splitting). The Splitting tariff roughly halves the marginal rate on the same income, so married users get very different numbers. For a joint filer, fold your spouse's income into the "other income" field.
3. Years of employment. This drives the bAV Vervielfältigung cap, which is 4% of the 2026 west BBG (€101,400) for each year of service, capped at ten years — a maximum of €40,560 that can move into a company pension tax-free.
4. Other taxable income this year. Your salary earned up to the termination plus anything else taxable in the payout year, expressed as taxable income (after Werbungskosten and allowances), not gross salary. The lower this number, the more the Fünftelregelung is worth.
Open the optimization options to refine the levers: unemployment benefit (ALG I) this year and next, income in the following year, bAV already used, and a Rürup contribution budget. From these inputs the tool builds four scenarios. Scenario A takes the money now with the one-fifth rule only. Scenario B defers the payout to January of the following year, useful if next year's income is lower. Scenario C converts the maximum into a bAV pension and applies the rule to the rest where it still qualifies. Scenario D combines a Dispojahr gap year with a bAV conversion and a Rürup contribution. The headline card names the lowest-tax option and the euro saving versus taking it now, and the chart splits each bar into net cash, money moved to a pension, and tax — so you never mistake a pension diversion for cash in hand.
The Fünftelregelung Formula (§34 EStG)
- = Income tax attributable to the severance under the one-fifth rule (§34 EStG)
- = The §32a income-tax function — ESt for single filers, 2 × ESt(x/2) for married Splitting
- = Your other taxable income in the payout year (zu versteuerndes Einkommen)
- = The taxable severance, after subtracting any tax-free bAV portion
The rule takes the tax on one-fifth of the severance added to your other income, then scales it back up by five. Compare that against taxing the full severance in one block:
Work the headline case — a single filer with €40,000 of other taxable income receiving a €50,000 severance in 2026. One-fifth of the severance is €10,000, so the fifth base is €50,000. Using the 2026 §32a tariff, ESt of €50,000 is €10,548 and ESt of €40,000 is €7,209, giving 5 × (€10,548 − €7,209) = €16,695 of income tax under the Fünftelregelung.
Taxing the same €50,000 in one block would put the person at €90,000 of taxable income: ESt of €90,000 is €26,664, minus ESt of €40,000 at €7,209, is €19,455. The one-fifth rule therefore saves €2,760 in income tax before surcharges — the realistic, everyday win. On top of the income tax the tool adds the Solidaritätszuschlag: assessed tax here is €23,904, which sits in the Soli Milderungszone, producing €423. Total tax on the severance is €17,118, so the net cash is €32,882 and the effective rate is 34.2%. A church member would add Kirchensteuer of €1,335 in Bayern or Baden-Württemberg (8%) or €1,502 elsewhere (9%).
Worked Examples (2026 Tariff)
The everyday case: €50,000 severance, €40,000 other income, single
You are single, you earned €40,000 of taxable income before leaving, and you receive a €50,000 Abfindung. Under the Fünftelregelung the income tax on the severance is €16,695; taxing it normally would cost €19,455 — so claiming the rule saves €2,760. Add the Solidaritätszuschlag of €423 and the total tax is €17,118, leaving €32,882 in your pocket at an effective rate of 34.2%. Do not expect the employer to hand you this saving: since 2025 they withhold as if there were no rule, and you only get the €2,760 back after you file. This is the number to memorize — a solid, defensible win, not a magic zero.
The gap-year play: €50,000 severance, almost no other income (Dispojahr)
Take the same €50,000 but arrange to receive it in a year where you have little or no other taxable income — a Dispojahr, the deliberate gap year before you claim benefits or start a new job. One-fifth of the severance is €10,000, which is below the 2026 Grundfreibetrag of €12,348, so the fifth is taxed at zero and 5 × zero is still zero. Income tax on the severance can fall to roughly €0. The honest caveat: this only holds if you genuinely have almost no other income that year. If you draw unemployment benefit (ALG I), the Progressionsvorbehalt lifts the rate and the tax is no longer zero, so model your actual ALG I before banking on it.
Moving part into a pension: €60,000 severance, €45,000 income, 8 years' service, single
With eight years of service your bAV Vervielfältigung cap is 4% × €101,400 × 8 = €32,448 that you can pay into a company pension tax-free. Take the €60,000 now and the total tax is €22,442, leaving €37,558 in cash. Convert the €32,448 into the bAV instead and the tax on what remains falls to €10,501 — a €11,941 reduction. But this is where honesty matters: €32,448 is now locked in a pension you cannot touch until retirement and will be taxed then (nachgelagerte Besteuerung). Your cash in hand actually drops from €37,558 to €17,051. The bAV route is powerful for retirement building, not a way to walk away with more cash today.
Unemployment benefit in the same year: €50,000 severance, €20,000 income, €8,000 ALG I, single
ALG I is tax-free, but §32b EStG counts it toward the rate applied to everything else you earn — the Progressionsvorbehalt. With €20,000 of other income and €8,000 of ALG I in the payout year, the total tax on a €50,000 severance under the one-fifth rule comes to €12,915. The lesson for planning: drawing ALG I in the same year you take a big severance pushes your effective rate up, which is exactly why a clean Dispojahr — severance in one year, benefits in another — often beats bunching both into a single tax year.
Income tax on a €50,000 severance by other income (single, 2026, before Soli)
| Other taxable income | Tax with one-fifth rule | Tax without (normal) | Fünftelregelung saving |
|---|---|---|---|
| €0 (gap year) | €0 | €10,548 | €10,548 |
| €20,000 | €13,235 | €16,694 | €3,459 |
| €30,000 | €14,960 | €18,247 | €3,287 |
| €40,000 | €16,695 | €19,455 | €2,760 |
| €70,000 | €21,000 | €21,000 | €0 |
Costly Severance Tax Mistakes to Avoid
- Assuming the Fünftelregelung is applied for you. Since 1 January 2025 (Wachstumschancengesetz) employers withhold the full tax and no longer apply the one-fifth rule in payroll. If you do not claim it in your tax return (Anlage N), you simply overpay — the relief is not automatic anymore.
- Splitting the payout across two calendar years. The rule requires the severance to arrive as a single concentration of income (Zusammenballung) in one year. Installments spread over years break that test and can forfeit the entire relief. Keep it to one payout (a harmless side-payment under about 10% in another year is tolerated).
- Taking the money in December when January would be better. If next year's income will be far lower — you are unemployed for a stretch or start a new job late — receiving the severance in January of that year can drop it into lower tax zones. Bad timing is one of the most expensive and most common errors.
- Starting a well-paid new job the same year. The Fünftelregelung only applies if the severance plus your other income clearly exceeds what you would have earned had the job continued (the Zusammenballung condition). Land a high-paying role in the same calendar year and you can lose the rule entirely.
- Treating a bAV or Rürup conversion as free cash. Money moved into a pension is not a tax refund — it is your money diverted into an account you cannot access until retirement, taxed then (nachgelagerte Besteuerung). It lowers this year's tax but also lowers your cash in hand today.
- Ignoring the Progressionsvorbehalt. Unemployment benefit (ALG I), Kurzarbeitergeld and Elterngeld are tax-free but raise the rate on your severance. A one-fifth-rule estimate that ignores them understates your real tax bill.
- Married couples defaulting to joint filing. Where one spouse receives a large severance and has little other income, separate assessment (Einzelveranlagung) can beat joint Splitting, because the spouse's income no longer inflates the rate on the payout. Run both.
Key German Severance Tax Terms
Abfindung (severance)
A one-off payment for losing your job. Fully taxable as income but exempt from social-security contributions. This calculator starts from a given gross Abfindung and works out the tax.
Fünftelregelung (one-fifth rule)
The §34 EStG relief that taxes a severance as if received in five equal parts, lowering the marginal rate. Since 2025 you must claim it in your tax return rather than receiving it via payroll.
Zusammenballung (income concentration)
The eligibility test for the one-fifth rule: the severance must be paid in a single year and, together with your other income, exceed what you would have earned had the job continued. Installments or a high-paying new job the same year can break it.
bAV Vervielfältigung (occupational-pension multiplier)
A §3 Nr. 63 EStG route that lets you divert part of a severance into a company pension tax-free — 4% of the west BBG per year of service, capped at ten years (€40,560 maximum in 2026).
Progressionsvorbehalt (progression clause)
Under §32b EStG, tax-free wage-replacement benefits such as ALG I, Kurzarbeitergeld and Elterngeld are excluded from taxable income but raise the average rate applied to the income that is taxed — including your severance.
Dispojahr (gap/disposition year)
A deliberately low-income year — taking the severance while unemployed and before drawing benefits or starting a new job — so the one-fifth rule lands in the lowest tax zones. Most powerful when you have little other taxable income.
Rürup-Rente / Basisrente
A private base pension whose contributions are deductible up to the §10 EStG ceiling (€30,826 single, €61,652 joint in 2026). A lump contribution in the payout year cuts taxable income but locks the money into a lifelong pension.
Solidaritätszuschlag (Soli)
A 5.5% surcharge on assessed income tax. For 2026 it only applies once assessed tax exceeds the Freigrenze (€20,350 single, €40,700 joint), with a phase-in Milderungszone above that, so most modest severances owe little or no Soli.
Kirchensteuer (church tax)
A surcharge on income tax for registered church members — 8% in Bayern and Baden-Württemberg, 9% in the other federal states. If you are not a church member it is zero.
Grundfreibetrag (basic allowance)
The income-tax-free threshold, €12,348 per person in 2026 (double for joint filers). Income below it is taxed at zero, which is why one-fifth of a severance falling under this figure can be taxed at nothing.
Splitting (joint tariff)
The married-couple tariff: combined income is halved, taxed, then doubled, which roughly halves the marginal rate on uneven incomes. For a big severance with a low-earning spouse, separate assessment sometimes beats it.
What This Calculator Does and Does Not Do
This tool is for general information and is not tax or legal advice — for a binding figure, consult a Steuerberater (German tax advisor). The results are estimates based on the 2026 income-tax tariff and follow the statutory rounding (taxable income and income tax floored to full euros), so they should match German tax software to within a few euros for standard cases.
It computes income tax, the Solidaritätszuschlag and Kirchensteuer only. It deliberately does not apply social-security contributions, because a genuine severance is exempt from them. It does not project how a bAV or Rürup pension will be taxed when you eventually draw it (nachgelagerte Besteuerung) — that money is shown as "moved to pension," not as tax saved. It does not calculate how large your severance should be (a labor-law question under the Kündigungsschutzgesetz), nor derive your ALG I amount; you enter those. It also does not resolve cross-border cases: if you leave Germany, the §50d(12) treaty override may still let Germany tax the payout, so an expat should check the specific double-tax treaty. Church-tax caps (Kappungsgrenze) in high-income cases and the §51a child-allowance add-back are outside its scope.
German Severance Tax — Frequently Asked Questions
How is severance pay taxed in Germany?
A severance (Abfindung) is fully taxable as income but is exempt from social-security contributions. Because it arrives in one year it can push you into a higher bracket, so the Fünftelregelung (one-fifth rule, §34 EStG) is used to spread the tax and lower the burden.
What is the Fünftelregelung (one-fifth rule)?
The one-fifth rule taxes your severance as if you received it in five equal slices. The tax office adds one-fifth of the severance to your other income, works out the extra tax, and multiplies it by five. It is worth most when your other income is low and the payout is large.
Is the one-fifth rule still applied automatically in 2026?
No. Since 1 January 2025, under the Growth Opportunities Act (Wachstumschancengesetz), employers withhold the full wage tax and no longer apply the Fünftelregelung in payroll. You must claim it yourself in your income-tax return (Anlage N) to get the relief.
How much tax will I pay on a €50,000 severance?
It depends on your other income. For a single filer with €40,000 of other taxable income in 2026, the one-fifth rule puts the income tax at €16,695 versus €19,455 if taxed normally — a €2,760 saving. With the Solidaritätszuschlag the total tax is €17,118, leaving about €32,882 net. With little or no other income that year, the tax can fall close to zero.
Is severance pay subject to social-security contributions in Germany?
For statutorily insured employees, generally not: a genuine severance is compensation for losing the job, not wages, so no health, care, pension or unemployment insurance is due on it (§14 SGB IV). Voluntarily insured members should check their own case. Either way, it is subject only to income tax, the Solidaritätszuschlag and, if you are a church member, Kirchensteuer.
Can I put my severance into a pension to save tax?
Yes, two ways. Under the bAV Vervielfältigung (§3 Nr. 63 EStG) you can move up to 4% of the west BBG per year of service — a maximum of €40,560 in 2026 — into a company pension tax-free. A Rürup (Basisrente) contribution is deductible up to €30,826 for a single filer in 2026. Both lower this year's tax, but the money is locked into a pension and taxed later in retirement, so it is not cash you keep now.
Should I take my severance in January of next year?
Often yes, if your income next year will be much lower. Deferring the payout to January of a low-income year — or a full Dispojahr gap year — moves more of the severance into lower tax zones. The calculator's Scenario B and D model exactly this so you can see the euro difference for your own numbers.
What happens to my severance tax if I receive unemployment benefit (ALG I)?
ALG I is tax-free but counts toward your tax rate through the Progressionsvorbehalt (§32b EStG), raising the rate applied to your severance. Drawing ALG I in the same year as the payout increases your effective tax, which is why separating the severance year from the benefit year (a Dispojahr) is often more efficient.
I'm an expat leaving Germany — will Germany still tax my severance?
Usually yes. While OECD Article 15 assigns severance to your country of residence, Germany's treaty override in §50d(12) EStG treats it as remuneration for prior work, so Germany can tax it even after you leave — unless your specific double-tax treaty has an express severance clause. Check the treaty between Germany and your new country of residence, and speak to a Steuerberater before assuming it is tax-free abroad.
Do married couples pay less tax on a severance?
It depends. Joint filing (Splitting) helps when incomes are uneven, but if one spouse gets a large severance and the other earns well, separate assessment (Einzelveranlagung) can be cheaper because the spouse's income no longer lifts the rate on the payout. Switch the calculator's filing status to compare both.
Is this German severance tax calculator free and how accurate is it?
Yes, it is free with no signup. It uses the 2026 §32a income-tax tariff, the §34 one-fifth rule, the §3 Nr. 63 bAV cap, §32b Progressionsvorbehalt, the Soli Freigrenze and church-tax rates, floored to full euros per statute. For a standard case it matches German tax software to a few euros. It is an estimate, not a binding assessment — confirm with a Steuerberater.
I have my result — what should I do next?
Start with the strategy the tool names as lowest-tax, but look at the chart: if the winner moves a lot into a pension, weigh whether you need the cash now. Take the printout or shared link to a Steuerberater, decide with your employer whether a January payout clause or a bAV conversion is possible, and remember to actively claim the Fünftelregelung in your return — it will not happen by itself.
Sources & References
- §34 EStG — Außerordentliche Einkünfte (the Fünftelregelung / one-fifth rule)
- §32a EStG — Einkommensteuertarif (the 2026 income-tax tariff and Grundfreibetrag)
- §3 Nr. 63 EStG — tax-free occupational-pension (bAV) contributions and the Vervielfältigung on termination
- §32b EStG — Progressionsvorbehalt (how ALG I and other wage-replacement benefits raise your rate)
- §10 EStG — Sonderausgaben (Rürup/Basisrente deduction ceiling)
- Finanztip — Abfindung versteuern: how the Fünftelregelung works and the Jan-2025 change to claiming it