Tax classes in Germany: don’t we just all love it?
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: TL;DR
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.
- 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.
There are 7 categories overall.
|Tax class||Marital status|
|Steuerklasse 0||You are not a German resident.|
|Steuerklasse 1||You are single, widow(er), separated/divorced|
|Steuerklasse 2||You are a single parent|
|Steuerklasse 3||You are married/in a civil partnership with a higher income (than your partner in Steuerklasse 5)|
|Steuerklasse 4||You are married with both equivalent income|
|Steuerklasse 5||You are married/in a civil partnership with a lower income (than your partner in Steuerklasse 3)|
|Steuerklasse 6||The class used for additional jobs (Nebenjob or Zweitjob)|
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
- Temp worker bonuses
- Sick leave
- Insolvency/interim allowance
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:
- Get a hold of the form “Antrag auf Steuerklassenwechsel bei Ehegatten” (Tax class switch request for married people). 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. Alternatively, you can download an empty PDF file here.
- Print-it and sign it (both partners)
- 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
The following is not available for single parents (yet).
- Login with your Elster account and head to this form for couples.
- 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)
- First page is your personal details.
- Second page is your partner’s details. (single parents ignore this)
- Ignore 3rd page if you do this application yourself. This is meant for tax consultants.
- 4th page is about stating what your current tax class combination is, and which one you want to switch to.
- 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 2023 for the year 2022, if you changed in 2022)
Tax class switch Germany – FAQ
Provided you make the application before 30/11 of that year, you can benefit from that tax cut for the months prior too.
You can use this very easy to use simulator. Enter both your gross salaries in it, together with your postal code. You will be able to see if it’s worth to make a tax class change in Germany, and who should be on tax class 3.
In most cases, this is only possible once a year. However, it is possible to do this more often in the following cases:
• When your partner is not an employee anymore (becoming a freelancer, retirement, parental leave, unemployment).
• When your partner is an employee again.
• When one of the partners passes away.
• In case of divorce or separation.
Very logically, life events that were just previously listed can be cause for change of tax class in Germany; marriage, divorce, death of partner, unemployment, retirement, parental leave, becoming a freelancer.
You would use this form (Erklärung zum dauernden Getrenntleben) to signify the Finanzamt that you are now separated from your partner. The adjustment will be then made automatically after they process this document. You can also do this via Elster here.
For a tax class change to be possible, both partners need to be “unbeschränkt einkommensteuerpflichtig“, which means to be subject to an unrestricted income taxation. In practical terms, this is made possible only when the partner is also a German resident. However, an exception to this rule is possible if you and your partner fulfill the following requirements (source):
• You have EU or Swiss citizenship.
• Your partner has residence in another EU country (+ Switzerland).
• At least 90% of your common total income is subject to German income tax. The same applies if the income not subject to German income tax does not exceed 19 964€ in a calendar year.
Hope this little guide about tax classes in Germany helped. Don’t hesitate to leave a comment if anything is unclear.