What are the advantages of the splitting tariff?
The income splitting method is a special taxation procedure applied when joint assessment is chosen by married couples and civil partnerships. This method can provide significant tax relief, especially when the partners have different income levels.
How does the income splitting method work?
- Combine incomes: The taxable incomes of both spouses are added together.
- Halve the income: The total income is then halved to reduce tax progression.
- Calculate the tax: Income tax is calculated for the halved income and then doubled.
Advantages of the income splitting method
- Lower tax rate with income differences: The income splitting method results in a lower average tax rate when one partner earns significantly more than the other. This makes the tax burden more equitable between spouses.
- Tax relief for single-earner marriages: Couples where only one partner earns an income benefit particularly, as the income is split as if both partners earn equally.
- Flexibility with income variations: Even with income fluctuations or temporary income losses (e.g. parental leave or illness), the income splitting method can offer tax advantages.
When is the income splitting method not advantageous?
- Similar incomes: If both spouses have nearly equal incomes, the income splitting method offers no tax advantage over individual assessment.
Requirements for the income splitting method
- The partners must be married or in a civil partnership.
- Both partners are fully taxable.
- They must have lived together for at least one day of the tax year.
Conclusion: The income splitting method offers noticeable tax relief, especially for couples with large income differences. For couples with similar incomes or specific tax situations, it is worth comparing with individual assessment. A tax programme like SteuerGo or advice from a tax expert can help choose the optimal assessment type.
