Frequent questions about choosing a tax class
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Which tax class applies to whom?
The tax class determines the amount of monthly income tax and is a crucial factor for your financial planning. In Germany, there are six tax classes, which apply depending on your personal life situation.
Tax Class I: For Single and Divorced Individuals
- Applies to single, divorced, or permanently separated employees.
- Married employees whose spouse lives abroad.
- Widowed employees if the spouse died before 1 January 2014.
- Employees with limited tax liability in Germany.
Tax Class II: For Single Parents with Relief Amount
- Applies to single parents who are single and run a household where at least one child lives.
- Entitlement to child benefit or a child allowance for the child.
- The child is registered with the employee's main or secondary residence.
Restrictions:
- Tax Class II is void if the single parent lives in a cohabiting relationship or another adult contributes financially or practically to the household.
- Must be applied for at the tax office, e.g. with the official form "Declaration for the relief amount for single parents".
Tax Class III: For Couples with a Main Earner
- Applies on request for married or partnered employees if both partners live in Germany and are not separated.
- Couples where one partner does not receive a salary or is classified in Tax Class V.
Special Regulation for Widowed Individuals:
- In the year following the death of the spouse, the widowed employee belongs to Tax Class III if the partner died after 31 December 2013 and both partners lived together on the day of death.
Tax Class IV: For Couples with Similar Income
- Applies to couples or partners who both receive a salary, live in Germany, and are not separated.
- Standard since 2018: Tax class combination IV/IV.
Option: The factor method can also be chosen to individually split the tax burden.
Tax Class V: Supplement to Tax Class III
- One partner chooses Tax Class III, the other is automatically classified in Tax Class V.
- Useful for large income differences between partners.
- Obligation to File a Tax Return: With the combination III/V, an annual income tax return is required.
Tax Class VI: For Employees with Multiple Jobs
- Applies to employees who receive a salary from multiple employers.
- The salary from the second and further employment is taxed according to Tax Class VI.
- It is advisable to use Tax Class VI for the job with the lower income.
Conclusion: Choosing the right tax class is crucial to optimise the monthly tax burden. While Tax Classes I to II apply to single individuals, couples can choose between different combinations depending on their income situation. Tax programmes such as SteuerGo or advice from the tax office can help to opt
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How do I change the tax class?
Spouses or civil partners who are both fully taxable, not permanently separated, and receive wages can adjust their tax classes to suit their income situation. Depending on the circumstances, they can choose whether:
- Both are assigned to tax class IV, or
- A combination of tax class III and V is chosen, with the higher earner placed in tax class III.
How to apply for a change of tax class
The change of tax class or the application of the factor method is made by submitting an application to the relevant tax office. The official form “Application for change of tax class for spouses/civil partners” must be used, signed by both partners, and submitted.
- The application must be submitted to the tax office in whose district the spouses or civil partners have their residence at the time of application.
- Alternatively, the change of tax class can be made as part of an “Application for income tax reduction”, for example, in connection with the consideration of allowances.
Deadlines and regulations for the change
- A change of tax class or the choice of the factor method is possible once a year and must be applied for at the tax office by 30 November at the latest.
- Exceptions allowing an additional change:
- One partner leaves employment (e.g. due to resignation or parental leave).
- One partner resumes employment after unemployment or parental leave.
- A spouse dies.
- Permanent separation of spouses or civil partners.
Special features of choosing the factor method
If the factor method is chosen, the expected wages for the current year from the first employment must be stated. The tax office then calculates the factor to ensure a fair distribution of income tax.
What happens if a change is missed?
- The previous year's tax classes automatically remain in place if no application is made.
- An application for a change of tax class by the end of the year is not considered a change but an adjustment and does not affect the right to a one-time change in the following year.
Why is a change of tax class advisable?
A change of tax class can help optimise the tax burden over the course of the year. For example, the combination III/V can be advantageous for couples with a large income difference, while the combination IV/IV with factor method allows for a fairer distribution.
Conclusion: Changing the tax class is a flexible tool to adjust the tax burden to life circumstances. However, it is important to meet the deadlines and consider individual income situations. If in doubt, it is worth contacting the tax office or using a tax programme such as SteuerGo.
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What must be taken into account when choosing the tax class of spouses or civil partners?
Spouses and civil partners can optimise their tax burden by choosing the appropriate tax class combination. They should consider the following points:
Basics
- Spouses and civil partners are usually taxed jointly (joint assessment), which is usually more favourable.
- The employer calculates the income tax based only on the employee's own salary, without considering the partner's income.
- The actual tax burden is determined during the income tax assessment at the end of the year.
Options
- Tax class combination IV/IV: Both partners pay according to the same rate. Suitable for similar incomes.
- Tax class combination III/V: Partner with higher income chooses class III, the other class V. Advantageous for large income differences, but with mandatory tax return.
- IV/IV with factor method: Fair distribution of income tax based on actual income ratio. Reduces additional payments, but requires a tax return.
Special features
- Wage replacement benefits: Tax class affects benefits such as unemployment benefit or parental allowance, as these are calculated based on net income.
- Change of tax class: Possible once a year until 30 November.
Conclusion: The choice of tax class has a direct impact on the monthly tax burden and wage replacement benefits. Use a tax programme such as SteuerGo or seek advice from the tax office to make the optimal choice.
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What is better: IV/IV or III/V or IV/IV with work-factor method?
There is no one-size-fits-all answer to this question. The optimal combination of tax classes depends on your individual income situation and financial priorities. Here is an overview of how the different combinations work:
IV/IV with factor method: Fair and balanced
- The income tax burden is divided according to the actual ratio of wages between the spouses.
- Ideal if both partners earn an income but have different salary levels.
- Obligation to submit a tax return: Ensures that overpaid or underpaid tax is balanced.
III/V: Low tax deductions in the calendar year
- One spouse (tax class III) pays significantly less income tax, while the other (tax class V) pays more.
- Particularly advantageous for large income differences when one partner is the main earner.
- Note: With this combination, there is always an obligation to submit a tax return to balance possible additional payments or refunds.
IV/IV: Simple and without obligation to submit a tax return
- Both spouses pay according to the same tax rate, regardless of their income.
- Suitable for partners with similar incomes, as no major additional payments or refunds are expected.
- Option: Overpaid tax can be refunded upon request through a tax return.
Further aspects of choosing a tax class
- Impact on wage replacement benefits: The choice of tax class affects the amount of wage replacement benefits such as unemployment benefit I, sickness benefit, maternity benefit or parental benefit. These benefits are based on net income, which depends on the chosen tax class.
- Change of tax classes: Changing the tax class or choosing the factor method during the year can have unexpected effects, especially in the case of:
- Receipt of wage replacement benefits
- Partial retirement or similar agreements
- Obligation to submit a tax return:
- With the combinations III/V and IV/IV with factor method, there is always an obligation to submit a tax return.
- For IV/IV without factor method, this obligation only exists in certain cases, such as high additional income.
- Advance consultation: If you plan to claim or are already receiving wage replacement benefits, you should contact your social benefit provider in good time. In partial retirement, it may also be advisable to coordinate with your employer.
Conclusion: The choice of tax class has a direct impact on the monthly income tax burden and the amount of wage replacement benefits. However, it does not affect the amount of the final income tax, as this is based on
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What is the factor method?
The factor method is an option for spouses or civil partners who wish to distribute their tax burden as fairly as possible during the year. It can be chosen instead of the tax class combination III/V or in addition to the tax class combination IV/IV.
How does the factor method work?
- Both spouses or civil partners remain in tax class IV.
- The tax office calculates a factor (less than 1) which is applied to each partner's wage tax.
- This factor ensures that the wage tax deductions during the year take into account the tax relief of the splitting procedure.
Advantage: Each partner already benefits from the basic allowance and a realistic tax distribution in the monthly wage tax deduction. This avoids additional payments at the end of the year.
How is the factor calculated?
The factor is derived from the ratio of the expected income tax in the splitting procedure to the sum of the wage tax under tax class IV/IV.
Example:
- Partner A: Salary 30,000 Euro (wage tax in class IV: 3,951 Euro).
- Partner B: Salary 12,000 Euro (wage tax in class IV: 77 Euro).
- Total wage tax (IV/IV): 4,028 Euro.
- Income tax (splitting procedure): 3,586 Euro.
- Factor: 3,586 Euro ÷ 4,028 Euro = 0.890.
The employers apply the factor to the respective wage tax:
- Partner A: 3,951 Euro × 0.890 = 3,516 Euro.
- Partner B: 77 Euro × 0.890 = 68 Euro.
Total wage tax after factor method: 3,584 Euro (corresponds to the income tax to be assessed).
Comparison: III/V and IV/IV with factor method
- Tax class combination III/V: The wage tax is initially calculated lower, but usually leads to an additional payment in the income tax assessment.
- IV/IV with factor method: The wage tax is distributed realistically, so that no additional payment is required (provided there are no other incomes).
Important notes on the factor method
- Obligation to submit a tax return: As with the combination III/V, an income tax return is also required for the factor method.
- Automatic classification in IV/IV: Since 1 January 2018, spouses and civil partners are automatically classified in tax class IV/IV when they marry.
Advantages of the factor method
- Fair distribution of the tax burden during the year.
- Avoidance of high additional payments in the income tax assessment.
- Flexibility through adjustment to the individual income situation.
Conclusion: The factor method is a sensible alternative for spouses and civil partners who wish to distribute their tax burden evenly and avoid additional payments. It combines the advantages of tax classes IV/IV with a realistic consideration of the splitting procedure.