Married folks benefit from tax advantages, which spouses can claim through joint taxation (Zusammenveranlagung). This process is popularly known as spouse splitting (Ehegattensplitting). However, tax authorities do not force married couples to file a joint return simply because they’ve tied the knot. Married people have the option of filing separate income tax returns (Einzelveranlagung).
The form of taxation you choose depends entirely on your individual circumstances. But why do the vast majority of married couples opt for joint taxation? Well, that’s the topic of discussion in this article.
Joint Taxation Information Worth Knowing (Zusammenveranlagung)
Since 2013, married people have two ways of submitting their tax returns to the tax services office. The first is the joint assessment (Zusammenveranlagung) which is commonly known as spouse splitting (Ehegattensplitting). The other way of submitting tax returns is the individual assessment (Einzelveranlagung).
What does the German tax law mean by a collective assessment (Zusammenveranlagung)? It means that couples can file a joint income tax return. The tax authorities treat the two individuals as a single person. This also means that spouses receive only one tax assessment (Steuerbescheid). A possible refund will, therefore, be transferred to one account and cannot be split across two accounts.
Requirements for A Collective Assessment (Zusammenveranlagung)
Not every taxpayer can benefit from a collective investment (Zusammenveranlagung). Taxpayers who are eligible to file a joint tax return must:
• Earn an income • Be legally married or planning to get married during the tax year • Not be separated or received a divorce judgement or decree on or before December 31.
For couples who have split but not divorced, the tax office assesses their income separately then adds the incomes. The total revenue is then halved again and the income tax is applied only on one half. The result is multiplied by two and the final result is the tax payable. As you can see, spouse splitting involves complicated calculations.
Since the revenues of both spouses are taken into account, the tax office also considers all expenses of the couple. Household expenses, child care expenses, medical expenses, extraordinary expenses, and special expenses can, therefore, be included in the tax return.
Does a joint declaration (Zusammenveranlagung) have to be applied for?
The splitting of spouse income does not have to be requested separately. However, it is important that married people tick the "joint assessment" checkbox if they want to be taxed as a couple. Those who do not check the box will have their income split and taxed separately.
When is a joint assessment (Zusammenveranlagung) worthwhile?
Joint assessment (Zusammenveranlagung) is a great option for couples who earn different amounts of money. The larger the salary difference, the higher the tax advantage.
An individual assessment (Einzeveranlagung) can be considered if one of the partners is self-employed. This option is also worthwhile even if one spouse receives wage replacement benefits like unemployment benefits (Arbeitslosengeld), sickness benefits (Krankengeld), and parental allowance (Elterngeld). Individual assessment can also be used by partners who receive a high severance pay.
Note: It is advisable to choose an option that makes the most financial sense for you. For example, choose one that lowers your tax and allows you to benefit from a repayment.
A decision for life?
No. Married couples can decide each year anew, which form of taxation (Veranlagung) they choose. However, those who do not inform the tax office about which option they choose will have their income taxed jointly (Zusammenveranlagung).