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Severance Pay Tax Calculator 2026

Calculate the net severance pay (Abfindung) under the one-fifth rule (Fünftelregelung, §34 EStG). The calculator shows the additional tax burden and the real net amount.

Your details

Your regular annual gross income (e.g. 12 monthly salaries)

The amount you receive as severance pay

About severance pay and the one-fifth rule

Severance pay (Abfindung) is a monetary payment made when an employment relationship ends. It is usually paid in the event of dismissals, termination agreements or social plan arrangements. The one-fifth rule (Fünftelregelung, §34 EStG) is a tax concession.

One-fifth rule (§34 EStG):

  • • One fifth of the severance pay is added to your regular income
  • • The resulting tax × 5 = total tax surcharge
  • • This significantly reduces the tax burden
  • • Applies to extraordinary income (e.g. severance payments, commissions)

Key points:

  • • Severance payments are free of social security contributions (taxes only)
  • • Solidarity surcharge and church tax are taken into account
  • • The one-fifth rule can be applied by the tax office
  • • Holding multiple jobs can exclude the rule

Note: This is a tool for orientation. Consult a tax advisor for exact calculations based on your individual circumstances.

Taxing severance pay: the one-fifth rule in 2026

Severance pay (Abfindung) is taxable employment income – but free of social security contributions. To keep the one-off large payment from running fully into tax progression, §34 EStG grants the one-fifth rule (Fünftelregelung): for tax purposes, the severance is treated as if it were received spread over five years. Our calculator shows how much of your severance is left after taxes and how large the advantage of the one-fifth rule is in your case.

Important change since 2025

With the Growth Opportunities Act (Wachstumschancengesetz), the one-fifth rule was removed from payroll withholding: the employer initially taxes the severance at the regular rate, which leads to a high tax deduction in the month of payout. The tax advantage is not lost – you reclaim it through your income tax return. Factor this liquidity gap into your negotiations.

Timing can be worth thousands of euros

The one-fifth rule has the strongest effect when your other income in the severance year is low. If you leave at the end of the year, you can often shift the payout to January of the following year – if the severance then falls into a year with little or no employment income, the tax burden drops considerably. In parallel, check your entitlement with the unemployment benefit calculator and the effect on your tax rate with the German tax table 2026.

Frequently asked questions about severance pay

What is the one-fifth rule (Fünftelregelung) under §34 EStG?⌄
The one-fifth rule softens tax progression on one-off large payments such as severance pay: the tax is calculated as if the severance were spread evenly over five years. To do this, the tax difference on one fifth of the severance is determined and multiplied by five. The lower your other income in the year of the payout, the larger the tax advantage.
Is the one-fifth rule still applied automatically by the employer?⌄
No. Since 2025, employers are no longer allowed to apply the one-fifth rule in payroll withholding – the severance is initially taxed in full. You now only receive the tax advantage through your income tax return: the tax office checks the one-fifth rule there automatically and refunds any overpaid tax.
Is severance pay exempt from social security contributions?⌄
Yes, genuine severance payments for the loss of a job are exempt from contributions to pension, health, long-term care and unemployment insurance. Only taxes apply. Exception: voluntarily insured members of the public health insurance without subsequent employment may have to pay health insurance contributions on the severance.
Do I have a statutory right to severance pay in Germany?⌄
There is no general statutory entitlement. Severance payments usually arise from a termination agreement, a social plan, a court settlement or the offer under §1a KSchG in the case of dismissal for operational reasons (there: 0.5 gross monthly salaries per year of employment). As a rule of thumb for negotiations, half to a full monthly salary per year of service is common.
How can I reduce the tax on my severance pay?⌄
The most effective levers: shifting the payout to a year with low income (e.g. the turn of the year or a sabbatical), contributions to an occupational pension scheme or a Rürup pension in the severance year, and making full use of work-related expenses and pension-related deductions. Important: the severance should be paid in a single amount, otherwise the one-fifth rule does not apply.
Is severance pay offset against unemployment benefit?⌄
In principle, no – severance pay does not reduce ALG I. But beware of two points: if the ordinary notice period is not observed in a termination agreement, the unemployment benefit is suspended until that period expires. And if you resign yourself or sign a mutually agreed termination agreement, a blocking period of up to twelve weeks may apply.

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