How to change tax class in Germany & why they are important

Tax classes in Germany is a fairly boring topic but also one of the most essential ones, especially in Germany.

There are many factors impacting on your income tax rate; few of them are more important than your tax class.

In this post, we will go over what it all means and if you think it’s relevant to your situation, how to change your tax class in Germany.

Tax classes in Germany – too long; didn’t read

Here is the short version of what you should know:

• Ranging from class 1 to 6, tax classes impact the amount of wage tax taken off your gross salary.
• Your tax class in Germany is more or less defined by your family status (single, married, in a partnership, single parent).
• By default, the Finanzamt assigns everybody tax class 4, you need to apply if you want to switch. It’s a relatively easy process.
• Married or in a partnership? You can increase your net salary with the right combination, depending on your respective incomes. Single parents have benefits to switch too.
• Being clever about tax classes can also increase social benefits.
• Keep in mind that tax classes are only a form of pre-calculation/pre-payment of your total income tax. The actual rate is defined when doing a tax return (Steuererklärung).

Read on for more details on how to optimize your tax situation with tax classes.

Quick overview

There are 7 categories overall.

In a marriage/partnership: optimize your net salary

As you can see, married people belong to different classes and optimize differently.

• By default, the Finanzamt will put both partners in tax class 4, when you first register your marriage or marry in Germany.
• For a lot of households, this is often not the best solution.
• When a big difference in income exists between the 2 partners, a 3/5 combination works best.

The German tax system knows that the higher-earner is often bearing more of the costs in the household. The idea here is to allow for a tax rebate when one of the partners earns significantly less than the other. As a result, moving from tax class 4 to tax class 3/5 might increase the net salary for the higher earner.

When is it worth to change classes in that case?

The higher-earner in the household has to earn a good deal more for this to make sense. They should earn at least 60% of the total household income.

Employees can calculate how tax classes impact their net income with this German salary calculator.

Single parents have advantages too

It’s also pays off to be in the right tax class in Germany as a single parent.

• You get a higher tax relief when being on class 2 (Entlastungsbetrag)
• You also get a higher tax allowance (the bracket of income that doesn’t get taxed).
• Requirement: at least one child lives the household that also receives child benefits (Kindergeld). When the child lives in multiple households, it’s only the person that receives Kindergeld that get the higher tax allowance.

Be aware that you do need to apply for a tax switch after your separation. It’s not made for you. You need a form called “Antrag auf Lohnsteuer-Ermäßigung” (you find it lower down this page).

The impact of tax classes on parental benefits – Elterngeld

As you may already know from this complete guide on Elterngeld in Germany, parental allowance is calculated on the basis of the net salary. You can take advantage of that to receive more Elterngeld when the time comes:

• Eltnergeld takes into account your income the 12 months preceding the first month of Elternzeit.
• The parent that takes the most Elternzeit and/or earns the most during that 12 months period, should have the most favorable tax class. This makes sure that their net salary is higher, hence increasing the total Elterngeld received.
• For this to work, you need to have switched to that class at least 7 months before the start of Elternzeit.

Same applies to Mutterschaftsgeld.

The impact of tax classes on other benefits

Similarly, other types of welfare benefits are calculated on your net salary. Being in the right class at the right moment can also increase the amount you receive, although it’s a bit harder to pull-off/predict. Those benefits include:

• Unemployment benefits (ALG 1) & sick pay (Krankengeld): These benefits are calculated from net income, so a lower tax burden in the last 12 months before claiming can increase benefits.
• Severance pay taxation (Abfindung): Steuerklasse III may be beneficial when receiving severance pay, as it allows more favorable tax treatment through the Fünftelregelung (one-fifth rule), reducing tax burden.
• Better pension contributions (Rentenversicherung): Lower taxable income might reduce pension contributions, but a higher net income could also improve retirement savings and benefits.
• Church tax (Kirchensteuer): spouses in different tax classes may reduce church tax obligations.
• Wohngeld, BaföG, Kindergeld: Some social benefits depend on taxable income; a strategic tax class change might help qualify for higher housing benefits (Wohngeld) or reduced student loan repayments (BaföG).

After separation/divorce

When a couple is parting ways, each individual will eventually have to switch back to class 1 or 2 (if there are children involved).

However, both can agree to stay on a 3/5 arrangement for the current year in order to save money, and file a tax return together or separately if they agree to do so. If filing a tax return return together becomes a disadvantage for one partner, they can request for the other partner to refund the difference.

How to change tax classes in Germany

Offline with a form

The process to change tax class in Germany is fairly simple for couples:

1. Get a hold of the form “Antrag auf Lohnsteuer-Ermäßigung und zu den Lohnsteuerabzugsmerkmalen“. Fill it online on the official finance ministry website this way When you have filled both pages in, you can download it as a PDF.
2. Print-it and sign it (both partners)
3. Send it to your Finanzamt

This is how it looks for single parents:

• Get a hold of the form “Antrag auf Lohnsteuer-Ermäßigung” (Application to wage tax reduction). Fill it the online of the ministry website here or download an empty PDF file here..
• Include the appendix concerning your children “Anlage Kinder”, which you will find here.
• Print and sign.
• Send to your Finanzamt.

Online with Elster

For couples:

1. Login with your Elster account and head to this form for couples.
2. Select the year for which this should take place (you can select the current year if application is sent before the last day of November)
3. First page is your personal details.
4. Second page is your partner’s details. (single parents ignore this)
5. Ignore 3rd page if you do this application yourself. This is meant for tax consultants.
6. 4th page is about stating what your current tax class combination is, and which one you want to switch to.

For single parents:

1. Login with your Elster account and head to this form.
2. Select the year for which this should take place (you can select the current year if application is sent before the last day of November)
3. First page is your personal details.
4. Second page is your partner’s details. (single parents ignore this)
5. Ignore 3rd page if you do this application yourself. This is meant for tax consultants.
6. 4th page is about stating what your current tax class combination is, and which one you want to switch to.

Important notes

• The tax class change will happen on the month following the request submission. So that’s when you can see a difference in your net salary.
• If both partners are employees and you have been through a tax class change in Germany, it is mandatory to submit a tax declaration (Steuererklärung; more info this way) after the end of the year (e.g: do one in 2025 for the year 2024, if you changed in 2024)

Tax class switch Germany – FAQ

Hope this little guide about tax classes in Germany helped. Don’t hesitate to leave a comment if anything is unclear.

Sources: 1, 2, 3, 4  , 5, 6