If you are living and working in Germany, you might be thinking about how to make your taxes work better for you. Your tax class (Steuerklasse) is one important thing that can change how much tax you pay and make a significant impact on your monthly drawn salary.
A Brief Overview of German Tax Classes
There are six tax classes in Germany, each with different tax rates and allowances. Your tax class depends on your marital status, your income, and your family situation. Here is a brief overview of the six tax classes:
Tax class I: This is the default tax class for single people without children. It has the standard tax rate and the basic tax-free allowance of 10,908€ as of 2023.
Tax class II: This is the tax class for single parents who live with their child in the same household. It has the same tax rate as tax class I, but with an additional tax-free allowance of 4,008€ as of 2023.
Tax class III: This is the tax class for married people or civil partners who have a higher income than their spouse/partner. It has the lowest tax rate and the highest tax-free allowance of 21,816€ as of 2023. It is also the tax class for widows/widowers in the year of death of their spouse/partner and for divorced or separated people who remarried or entered a new civil partnership in the same year.
Tax class IV: This is the tax class for married people or civil partners who have similar incomes. It has the same tax rate and tax-free allowance as tax class I. It is also the default tax class for married people or civil partners who live in Germany.
Tax class V: This is the tax class for married people or civil partners who have a lower income than their spouse/partner. It has the highest tax rate and the lowest tax-free allowance of 0€. It is the opposite of tax class III.
Tax class VI: This is the tax class for people who have more than one job. It has the highest tax rate and no tax-free allowance. It is applied to the second and subsequent jobs.
Tax Percentage in Each Tax Class
The tax percentage in each tax class depends on your taxable income, which is your gross income minus your deductions and allowances. The tax percentage is calculated using a progressive tax rate, which means that the higher your income, the higher the tax rate. The tax rate ranges from 0% to 45%, plus a solidarity surcharge of 5.5% and a church tax of 8% or 9% if you are a member of a religious community.
Here is an example of how the tax percentage is calculated for each tax class in 2023, based on a monthly taxable income of 3,000€:
Why Change Tax Class
Your tax class determines how much income tax, solidarity surcharge, and church tax are withheld from your monthly salary by your employer. It also affects how much child benefit (Kindergeld) and parental allowance (Elterngeld) you can receive. Changing your tax class can help you reduce your tax burden and increase your net income, especially if you are married or have children.
Who Can Change Tax Class
Anybody can change tax class in Germany. However, you need to meet one of the following conditions:
You are married or in a registered civil partnership and both you and your spouse/partner live in Germany
You are married or in a registered civil partnership and one of you lives abroad in another EU/EEA country
You are divorced, widowed, or permanently separated and you remarried or entered a new civil partnership in the same year
You are a single parent and you live with your child in the same household
The Process and the Timeline
The process of changing your tax class in Germany is relatively simple and straightforward. You have two options:
Submitting a paper form to your local tax office (Finanzamt)
Applying online for tax class change on Elster
Submitting a paper form to your local tax office
You can download the form “Antrag auf Steuerklassenwechsel bei Ehegatten” (Application for tax class change for married people) or “Antrag auf Steuerklassenwechsel bei Lebenspartnern” (Application for tax class change for civil partners) from the website of your local Finanzamt. You can also get the form from your local tax office or ask your employer to provide it for you.
You need to fill out the form with your personal details, your spouse’s/partner’s details, your current tax class combination, and your desired tax class combination. You also need to sign the form and attach a copy of your marriage certificate or civil partnership certificate. If one of you lives abroad, you also need to provide a certificate of unlimited tax liability (Bescheinigung für den unbegrenzten Steuerpflicht) from the foreign tax authority.
You can send the form by post or deliver it in person to your local tax office. You can find the address of your local tax office on the form or on the website of the Finanzamt.
Below you may find a sample tax class change form for your reference.
Applying online for tax class change on Elster
You can also apply for tax class change online on Elster, the official online portal of the German tax authorities. You need to register on Elster and create an account. You also need to activate your account with an activation code that will be sent to you by post.
Once you have logged in to your account, you can access the online application for tax class change under “Steuerklassenwechsel”. You need to fill out the online form with the same information as the paper form. You also need to upload a scanned copy of your marriage certificate or civil partnership certificate. If one of you lives abroad, you also need to upload a scanned copy of the certificate of unlimited tax liability.
You can submit the online application with your electronic signature. You will receive a confirmation email and a PDF file of your application.
The Timeline of Changing Tax Class
You can change your tax class once a year, usually until November 30th. The change will take effect from the following month. For example, if you apply for tax class change in October, the change will take effect from November. If you apply in December, the change will take effect from January of the next year.
However, there are some exceptions to the once-a-year rule. You can change your tax class more often if you have a change in your life situation, such as:
You or your spouse/partner become unemployed, self-employed, retired, or go on parental leave
You or your spouse/partner start a new job
Your spouse/partner passes away
You get divorced or separated
You remarry or enter a new civil partnership
In these cases, you can apply for tax class change within one month of the change in your life situation. The change will take effect from the following month.
Some Tips and Advice
Here are some tips and advice to help you choose the best tax class for your situation and w your tax return:
If you are married or in a civil partnership and one of you earns significantly more than the other, you can benefit from choosing the tax class combination III/V. This way, the higher earner will pay less tax and the lower earner will pay more tax, but the overall tax burden will be lower. However, this also means that the lower earner will receive less net income and less social benefits, such as unemployment benefits or parental allowance. Therefore, you should consider your personal and financial circumstances before making this decision.
If you are married or in a civil partnership and you have children, you can choose the tax class combination IV/IV with a child allowance (Faktorverfahren). This is a special option that allows you to adjust your tax rate according to the number of children you have and the child benefit you receive. This way, you can reduce your tax burden and avoid paying too much or too little tax during the year. You can apply for the child allowance online on Elster or by submitting a paper form to your local tax office.
If you are a single parent and you have a child living with you, you can choose tax class II. This will give you an additional tax-free allowance and a higher child benefit. However, you need to prove that you are the sole caregiver of your child and that no one else is entitled to claim child benefit for your child. You can do this by submitting a certificate of entitlement (Bescheinigung über den Freibetrag für Alleinerziehende) to your local tax office.
If you have more than one job, you can choose tax class VI for your second and subsequent jobs. This will ensure that you pay the correct amount of tax on your total income from all sources. However, you should be aware that tax class VI has the highest tax rate and no tax-free allowance, which means that you will receive less net income from your second and subsequent jobs. Therefore, you should consider whether the extra income is worth the extra tax.
If you are not sure which tax class is best for you, you can use the online tax class calculator (Steuerklassenrechner) on the website of the Federal Ministry of Finance. You can enter your personal and financial details and compare the different tax class combinations and their effects on your net income and tax liability. You can also consult a tax advisor (Steuerberater) for professional guidance and advice.
Conclusion
Changing your tax class in Germany can have a significant impact on your tax situation and your net income. Depending on your marital status, your income, and your family situation, you can choose from six different tax classes, each with different tax rates and allowances. You can change your tax class once a year, usually until November 30th, or more often if you have a change in your life situation. You can apply for tax class change online on Elster or by submitting a paper form to your local tax office.
Choosing the best tax class for your situation can help you optimise your tax return and save money. However, it can also be a complex and confusing process, especially for expats who are not familiar with the German tax system. Therefore, it is advisable to use the online tax class calculator or consult a tax advisor before making any decision. We hope that this article has provided you with some useful information and guidance on how to change tax classes in Germany.
Some Frequently Asked Questions
What are tax classes, and why do they matter for expats in Germany?
Tax classes, known as "Steuerklasse" in German, determine how much income tax you pay. They matter for expats as they can impact your tax liability and take-home pay.