How tax classes affect taxes (Zusammenveranlagung vs. Einzelveranlagung)

German tax law has it pitfalls. There are different types of income, the tax rate progressively increases, withholding tax has to be paid and there is also the whole jumble with the tax classes, which can change depending on your living situation.

Even if you're not necessarily a tax expert: A lot is definitely easier if you marry - at least from a tax point of view. Allowances increase, cheaper tax rates can be selected and, last but not least, you can save money after the wedding.

But, one thing at a time. What does it actually mean, for example, to be in tax class III? Or why do I pay so much taxes in tax class V? Why should married people always file a joint tax return? We looked for the answer to this.

Which tax classes are there in Germany?

There are 6 tax classes in Germany. You are assigned a tax class by your respective tax office. For example, the tax class allows an employer to calculate an employee's payroll tax. The tax class that you are assigned mainly depends on your marital status. Single people are assigned to class I, single parents to class II etc. There are special situations for spouses.

Married couple: tax class combination III and V

For married couples, the combination of tax classes III and V increases the basic allowance and increases to €18,000. This applies to both salaries together. All other allowances remain the same, except that the children's allowance of €7,428 only applies to those partners who are in tax class III.

Filing jointly: Why married couples should file their taxex together

By filing jointly, a married couple only have to submit one tax declaration. The law then treats both as a single person. This results in spouses receiving only one tax assessment notice. A possible refund will, therefore, only be transferred to one account and can not be divided into two.

If the spouses are assigned tax classes III and V, then it makes sense to file a joint tax return regardless. Assignment to tax classes III and V is by request. This requires that the spouses have their residence in Germany, they do not live separately and one spouse receives a lower salary than the other.

Spouses will thus be taxed in such a way that no basic allowance is recognized in the calculation of income tax in tax class III, whereas in tax class V this is doubled. The person in tax class V is taxed at 100%, the person in tax class III is left with more net salary because of the allowances.

The combination III and V is advisable if the amount of income is approximately a ratio of 60:40 and the high earner decides on tax class III. The spouse with the lower income is then automatically assigned tax class V.

Tax class combination III and V: Why filing individually is discouraged

If a married couple chooses the tax class combination III and V, it is inadvisable to make an individual assessment (spouses must submit their own tax returns). This means they should generally file a tax return together.

Especially, the person assigned tax class V must expect to make a possible payment as opposed to a refund, because, for example, no allowances are recognized. Especially if the partner with tax class V does not have a job or generally does not earn any income, they should file jointly.

Note: In our tool, the spouse must be stated regardless. It does not matter if the partner has not earned any income. Only then can the tax refund amount be calculated correctly.

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