You have moved to Germany, and sooner or later, you might be wondering what the deal with the tax class in Germany is? Let me start by saying that the tax class in Germany is only relevant to employees. Our friends from Expatica have an excellent guide on taxes for freelancers and self-employed in Germany. If you are an employee, keep reading, as we explain the different tax classes and their role in how much taxes you pay in Germany.
What Are The Tax Classes In Germany?
There are six tax classes (Steuerklassen) in Germany:
|German Tax Class||Marital Status|
|Tax Class 1||You are single, widowed,
|Tax Class 2||You are a single parent, living separately|
|Tax Class 3||You are married (or widowed within the first year of the spouse’s death) with a significantly higher income than your partner in tax class 5|
|Tax Class 4||You are married with both spouses earning similar income|
|Tax Class 5||You are married with a significantly lower income than your partner in tax class 3|
|Tax Class 6||The tax class for second and side jobs (regardless of marital status)|
The combination of tax class 3 and 5 is only possible for married couples if both spouses live in Germany. If your spouse is still in your home country waiting for their visa, you will be placed in tax class 1 and you will need to apply for a tax class change, once your spouse is also registered in Germany.
How To Know Your Tax Class In Germany?
After you registered in Germany (Anmeldung), you will receive your tax ID within the next six weeks. You need to give this tax ID to your employer. Additionally, the tax authorities (Finanzamt) assign you to your tax class primarily based on your marital status: single, single parent, or married. The tax authorities will inform your employer accordingly; however, it could take a few weeks.
Only once your employer knows your tax ID and tax class, they can calculate the deductions of your salary correctly. Until then, you will get taxed with the highest tax rate in the German tax system. You will be able to see your tax class on your payslip indicated as SKl (Steuerklasse).
Related Guide: German Payslip Explained
❗️ Important: There is a misconception out there that the tax class impacts how much tax you pay in Germany. That is wrong! Your income dictates how much taxes you need to pay! The tax class is a mere tool, to adjust how much taxes you pay per month.
No one said the tax system in Germany was easy, but don’t worry, keep reading for a better understanding.
What Is The Income Tax In Germany?
The tax class influences the amount of your monthly tax payments. Your total yearly tax deductions, however, depend on the total amount of your taxable income, like your yearly salary, or income from properties or investments. This is where the income tax system comes into play. The income tax gets deducted from your monthly salary by your employer. It is a progressive tax ranging from 14% to 42%.
Income up to 9.984 euros in 2022 is tax-free (Grundfreibetrag). Income more than 58.597 euros gets taxed with the highest income tax rate of 42%. The so-called rich tax (Reichensteuer) of 45% starts at an income of 277.826 euros. When calculating how much income tax, you need to pay, you need to differentiate between the marginal tax rate (14 – 42%) and the average tax rate, which is what you will actually pay (usually it is lower than the marginal tax rate).
If you are a regular employee with no other income other than your salary, the proper term for the tax that gets deducted on your payslip is wage tax.
Example Calculation Of Wage Tax Rates In 2022 In Germany
|Taxable Gross Income||Marginal Income Tax Rate||Average Income Tax Rate||Tax Amount||Remaining Net Income|
To calculate how much wage tax, you are paying, you can use this German salary tax calculator. It will also show you, how much church tax, solidarity tax, and social security contributions (consisting of health insurance, unemployment insurance, long-term care insurance, and pension insurance) you will need to pay.
How To Reduce Your Tax In Germany?
The best way to reduce your tax in Germany is to file a tax declaration at the beginning of a new calendar year. Every tax resident in Germany has the right to file a tax return, and the average tax return in Germany is 1.027 euros. To learn how to submit a tax declaration, please read our related guide.
Related Guide: How To File A Tax Declaration In Germany
In case you are paying church tax, and you are not really religious, you have the option to leave the church to stop paying taxes. This could easily save you 700-800 euros a year. Read our in-depth guide below to learn more about the church tax.
Related Guide: Church Tax in Germany
When Do You Have To Change Your Tax Class?
You have to change your tax class in Germany when your family circumstances change fundamentally. Divorce and marriage, when done in Germany, get communicated by the registry office automatically to the financial authorities. For other reasons, you have to report such changes to the tax office until the due date, which is November 30th. Your new tax class will then become effective the following month.
Reasons For A Change In Tax Class
- Marriage → change to tax class 4
- Separation/divorce → change to tax class 1 (if you don’t have children or children without full custody) or to tax class 2 (if you are a single parent and you have sole custody)
- Birth of a child and you will have sole custody → change to tax class 2
- Death of a spouse → change to tax class 3 in the first two years after the death, afterward change to tax class 1 or 2
Tax Class Change After Marriage
In case you recently got married, congratulations! Your registration office will automatically forward your data change to the financial authorities in Germany. After a wedding, the Finanzamt will change both spouses’ tax class to tax class 4 by default, regardless of whether one spouse is not earning any income or significantly less than the other.
In case you would like to switch to tax classes 3 and 5, you will have to request the change via a form. We explain to you below how that works. The change to tax class 3 and 5 as a married couple only makes sense if one spouse is earning at least 60% of the total household income. Since 2020, married couples can change tax classes multiple times per year; a change was only possible once in the past.
Related Guide: Getting Married In Germany – The Ultimate Guide For Expats
German Tax Class Calculator
For a quick estimation of whether you should consider a tax class change to 3 and 5, you can use this German tax class calculator. It is in German but pretty self-explanatory. You have to enter both spouses’ gross salaries and tick the box, whether you have children.
❗️Word of advice: This calculator is just a rough estimate. You can only get a qualified answer from a certified tax consultant. Through the below form you can consult with expert tax advisors through the platform yourXpert. The following website will be in German, however, you can translate the page by using Chrome as a browser, then do a right-click and select ‘translate to English’. You can fill the form and ask your question in English. yourXpert will forward your inquiry to English-speaking consultants only.yourXpert: Need tax advice in Germany?
By choosing the right combination of tax classes, you can decide whether you would rather pay more tax each month and then get a higher tax refund with your annual tax return, e.g. in case of both spouses staying in tax class 4.
Or whether you pay less tax each month instead and thus have a slightly higher monthly net income available, e.g. with tax class 3 and 5. In return, you will only receive a small tax return or maybe even pay some underpaid taxes back to the Finanzamt after you have submitted your tax declaration.
❗️ Important: At the end of the day, you won’t make any profits or losses when changing tax classes, as the amount of income tax remains identical. The tax class has no impact on the amount of income tax you have to pay yearly. Instead, the tax class only impacts the monthly distribution of your income tax payable.
How To Change Your Tax Class?
Changing your tax class in Germany as a married couple is fairly easy and only involves one bureaucratic document. Currently a big yellow box is blocking the online entry of data on the form to request a tax change (Antrag auf Steuerklassenwechsel bei Ehegatten). To circumnavigate this yellow box you can follow these steps:
- Download the document first by clicking on the pdf icon on top.
- Print it, fill it out, and sign it – both spouses have to sign it.
- Send it to your Finanzamt.
You could fill it out in the German Elster tax system, but that would require you to register, which can take up to two weeks and everything is purely in German.
Once you change to tax classes 3 and 5, you are automatically obligated to file a joint tax declaration at the end of the year.
How To Fill Out The Antrag Auf Steuerklassenwechsel Bei Ehegatten
Line 1: Steuernummer – your individual tax number assigned by your local tax office to catalog your documents faster. If you have filed a tax declaration before, you can find it on your last tax assessment (Steuerbescheid). Otherwise, leave it empty.
Line 2: An das Finanzamt – the name of your city or relevant tax office.
Line 3: Bei Wohnsitzwechsel: bisheriges Finanzamt – in case you moved, name your previous tax office.
Lines 4-10: Antragstellende Person – the partner filing the request.
Line 5: Identifikationsnummer (IdNr.) – Tax ID (the one of the partner filing the request), you can find it on your last payslip.
Lines 6-9: Personal details and address of the spouse filing the request.
Line 10: Verheiratet/Verpartnert seit – married since
Verwitwet seit – widowed since
Geschieden seit – divorced since
Dauernd getrennt lebend seit – permanently separated since
Line 11: Identifikationsnummer (IdNr.) – Tax ID of the other spouse
Lines 12-15: Personal details and address of the other spouse.
Line 17: Bisherige Steuerklassenkombination – previous tax classes, check the box to the left of “IV/IV”
Line 18: Wir beantragen die Steuerklassenkombination – we request the tax class combination (partner filing the request / other spouse), check the box to the left of “III/V” or “V/III” depending on which spouse has the higher income.
Line 19: Tick the box, if you want the tax class change to be effective retroactively since the day of the wedding.
Leave part C blank.
Line 43: Both spouses have to sign; the partner filing the request signs first.
Your marital status determines your tax class in Germany. The only time you can choose your tax class is after getting married. Both spouses’ income determines whether a tax class change makes sense to receive a temporary tax advantage on your monthly income. Remember, though, that the amount of income tax per year remains identical.
Disclaimer: Neither myself as the author of this article, nor Simple Germany as a business, are qualified to provide tax advice under German law. We cannot provide specialist tax services beyond any of the general tips contained herein. For tax advice, we strongly recommend you consult a professional tax consultant.