Severance Pay Calculator

A severance is a consolation prize with a tax trap. The gross figure in the termination agreement is a nice number, but because it flows in all at once in a single year, it pushes you up the tax progression. Without a countermeasure a substantial part can go to the tax office. The Severance Pay Calculator shows you in black and white how much stays net.

The core is the comparison of two scenarios. In the first, the severance is taxed entirely normally together with your other income. In the second, the one-fifth rule under Section 34 EStG kicks in, which is meant for extraordinary income like severance. Simply put, it pretends the severance is spread over five years, which can soften the progression peak. The tool computes both routes and puts the net figures side by side.

Important and often overlooked: since 2025 employers no longer apply the one-fifth rule automatically in payroll. That means regular wage tax is withheld on the payout first, and you claim the relief back only through your tax return. The Calculator makes this difference visible, so you know the lower tax is not lost but merely comes later.

The calculation does not stop at income tax. The solidarity surcharge and, if you are liable for church tax, the church tax also come into play and are factored in. Church tax in particular can amount to a noticeable sum on a large severance that is easy to overlook.

Because tax depends heavily on how high your other income is in the same year, there is a timing view. It shows how the net changes depending on which year the severance flows in - for example if you are about to move into a year with lower income anyway. The timing of the payout is one of the few real levers, and the Calculator makes it tangible.

A step-by-step breakdown shows you each calculation step of the one-fifth rule, so the final number is not a black-box result but traceable. The Severance Pay Calculator is a calculation and orientation tool, not tax advice - for a binding assessment of your case, a tax advisor remains responsible. But you walk into that conversation with solid figures instead of a gut feeling.