What is the difference between gross and net income?
January 16, 2022 | 30,00 EUR | answered by Claudia Köhler
Dear tax advisor,
I am Erwin Strauss and I have a question about my payroll. I have been working in my current job for several years and have noticed that I have only been receiving my net salary in my bank account. Now I am wondering what the exact difference is between gross and net salary and why I have only been paid my net salary so far.
I have noticed that my gross salary on my payslip is always higher than the amount I actually receive in my bank account. This has confused me and I am wondering where this difference comes from and what deductions or taxes are taken from my gross salary before my net salary is calculated.
I am worried that I may not be receiving the full amount of my salary and therefore would like to understand why there is a difference between gross and net salary and what factors play a role in this. Are there ways to increase my net salary or minimize taxes in order to keep more of my gross salary?
I would greatly appreciate it if you could explain the difference between gross and net salary to me and provide me with possible solutions to better understand and improve my financial situation.
Thank you in advance for your help and support.
Sincerely,
Erwin Strauss
Dear Mr. Strauss,
Thank you for your question regarding payroll. It is understandable that you are concerned about why your net salary is lower than your gross salary. I am happy to explain to you the exact difference between gross and net salary, as well as the various deductions and taxes that are taken from your salary.
The gross salary is the amount that you have agreed upon with your employer contractually. This amount includes all salary components, such as base salary, potential allowances, bonuses, or benefits in kind. The net salary, on the other hand, is the amount that you actually receive in your account after all deductions and taxes have been taken.
Deductions include social security contributions that are deducted from your gross salary. This includes contributions for health insurance, nursing care insurance, pension insurance, and unemployment insurance. These contributions are automatically deducted from your gross salary to finance these social security benefits.
Additionally, taxes are also deducted from your salary, such as income tax and, if applicable, solidarity surcharge and church tax, depending on your individual tax class and the deductions you can claim.
It is important to understand that these deductions are legally required and non-negotiable. However, there are ways to optimize your net salary, such as by utilizing tax deductions, like work-related expenses or special expenses, that you can claim in your tax return. Optimizing your social security contributions may also be possible under certain circumstances.
To increase your net salary and improve your financial situation, I recommend consulting a tax advisor who can analyze your individual situation and provide you with tailored solutions.
I hope this explanation has been helpful to you. If you have any further questions, please feel free to contact me.
Sincerely,
Claudia Köhler
