Tax Classes in Germany Explained: All You Need to Know

席琳-姆瓦乌拉
August 20, 2024
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6 分钟

If you’re living in Germany, one of the most important topics to learn is about the German tax classes. Much like other countries, Germany has several different ways of categorising individuals for taxes. These tax classes in Germany are typically assigned to you by a local tax office to help your employer calculate your monthly income tax. However, your tax class is also influenced by your marriage status.

In this article, we’ll discuss the various tax classes in Germany so that you understand what you might be taxed, why, and how and when you may change tax classes. Let’s start by exploring the basics of the German tax class system.

Understanding the German Tax Classification System

The tax class system is based on a few specific factors that are taken into account. You’ll be subject to the same tax laws if you’re a citizen or have a resident’s permit. However, the criteria that people generally turn to determine which of the German tax classes you belong to relates to the following:

  • Relationship status: If you are married or single, this will be taken into account for your taxes. Single filers and married filers have different categorisations, but so do partnerships that are registered with the nation.
  • Number of children: Families and people without children are taxed differently. You’ll also be taxed differently if you are a single parent versus a married parent.
  • Number of jobs: Whether you have a single job or multiple jobs, you will be taxed accordingly within the German tax system. Those who have a second job may be subject to additional taxation rates.

If you're living in Germany and paying taxes here, you should be aware that every individual has a unique situation that determines their tax classification. Let’s explore the six different tax classes in Germany.

Benefits of Understanding Your Tax Class

Knowing which German tax class you belong to helps you:

  • Optimise tax withholding: Ensure the right amount of tax is withheld from your salary, avoiding surprises during tax season.
  • Financial planning: Better predict your net income and plan your finances accordingly.
  • Take advantage of allowances: Utilise all available allowances to reduce your taxable income.

Overview of All Six German Tax Classes

Man doing taxes with calculator

In Germany, there are six different tax categorisations that you might fit into. They range from single or separated to secondary employment, all of which are taxed at different rates. Let’s discuss each tax class individually and what criteria are required for you to qualify for each tax class.

Tax Class I - Single Individuals

If you are single, divorced, widowed, and have no children, you will likely be in this tax class. It has the lowest income tax rate and is set at the standard tax rate without any additional benefits for family tax situations. It is important to note that while this is the first of the tax classes in Germany, you are subject to a higher tax than those who benefit from family-related tax benefits.

Students who work part-time jobs usually fall under tax class I as well. However, if they have more than one job, additional income will be taxed under Tax class VI.

Tax Class II - Single Parents

If you are a single parent living with your child or multiple children, you are part of the second of the German tax classes. With this tax class, Germany provides single parents with an additional benefit because of their situation, the Entlastungsbetrag. This allowance helps provide extra support to parents who are raising kids alone, reducing their tax rate.

Tax Class III - Married Couples with Income Differences

For those who are married or in partnerships where one partner earns more than the other, then you will be part of the third tax class rate. This is the lowest tax rate for married couples, and it helps them if they have a single income or a significant difference in the salary between partners. If you have the option to choose this, it is widely recommended, as it can add additional tax savings that you might not get otherwise.

Tax Class IV - Married Couples with Similar Incomes

If you have a similar income to your spouse and are married, you’ll be part of this German tax class. This is much like the first of the tax classes in Germany, providing you with tax benefits that are fair and equal so that each partner receives benefits when they file their taxes.

Tax Class V - Lower-Earning Spouse

German residents who are part of the third of the tax classes in Germany will also likely qualify for this one. If your partner earns much less than you do, tax class V in Germany allows for higher tax rates that can optimise taxes when it comes time to file rather than creating significant disparities in benefits for both partners involved. Typically, the lower-earning spouse takes this class and the higher tax rate is applied to the lower income.

Tax Class VI - Secondary Employment

Finally, tax class VI is for those who have more than one job and are subject to the highest tax rate in Germany. This is to ensure that people are taxed appropriately for all money earned, even if it is from a second job. This is not solely for single or married filing partners but for all who may have a second job in Germany.

How and When Do Tax Classes Change in Germany

The answer depends on several factors, including, but not limited to, your marital status, your family size, and how many jobs you hold every year. When you first arrive in Germany, you will have to make an initial declaration that confirms your categorisation in one of the six tax classes.However, when it comes to changes to your tax class, you’ll see changes either annually or with significant life changes. These are some condition that would require a change in tax classes:

  • Marriage or divorce: After getting married, you may switch to a more favorable tax class combination. Similarly, a divorce will require you to update your tax class.
  • Birth of a child: Single parents can move to Tax Class II after the birth of a child.
  • Changes in employment status: If you or your spouse’s employment status changes, you may have to reassess your tax class combination.

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