Tax class choice 3 and 5: Why you shouldn’t believe your tax advisor

What do the tax classes actually regulate?

With the tax class, the tax office regulates how much Income taxes monthly throughout the year in advance are to be paid. The tax class rules not the amount of the tax. It regulates the distribution during the year.

Various allowances are granted using the tax brackets.

For singles, divorced or widowed people and single parents there is only one wage tax class:
– Single, divorced, widowed, living separately (with and without children): tax class 1
– Single parents with child(ren): tax bracket 2

Singles with child(ren) are grouped into income tax class 1 if they live in a marriage-like community – whether with the other parent or a boyfriend or girlfriend. Then they are considered as not single parents from the tax law.

Married couples privileged by the state. You can choose from 2 tax class combinations at the tax office.
– Tax class 3 and 5
– Tax class 4 / 4 with and without a factor

Tax class choice 3 and 5

With the Kombi 3/5, the joint tax burden is stretched over the year and shifted to class 5 in favor of class 3.

Therefore, married couples who choose 3/5 must also submit a tax return at the end of the year for the annual wage tax adjustment. This is exactly why it is called in bureaucratic German: Annual payroll tax adjustment.

Because at the end of the year, the tax office throws both incomes into a virtual pot, deducts allowances, lump sums and special expenses, shares with joint assessment everything by two and calculated then the final annual income tax. The taxes paid during the year are calculated against this. If too little was transferred during the year, the tax office will demand an additional payment. If too much was transferred, we will receive a refund.

Married couples cannot “save” taxes by choosing their tax class. It doesn’t matter which tax class combination you choose. This is important for the tax together scored annualIncome. Spouse splitting is what couples use to save taxes.

The choice 3/5 even has another major disadvantage: often a back tax payment is due because too little tax was transferred to the tax authorities during the year.

In tax class 5, women leave their own basic allowance to their husbands

Why are taxes lower in tax class 3 and higher in tax class 5? Because the person in tax class 5 pays part of the taxes for tax class 3. This is achieved by redistributing the allowances.

The state grants one to every worker Basic allowance that is tax-free. In 2022, this basic allowance will be €9,984.

An example:

Choice of tax class - in 5 you pay extra

In tax class 5, the basic allowance is not applied. Instead, it is added to the spouse, who thus has to pay less tax despite their higher salary. So he has more net. The partner with a lower salary, on the other hand, pays more taxes and has less net income.

The difference can be enormous, as the example of the Hans Böckler Foundation shows – a comparison of the combination 3/5 and 4/4:

Choice of tax class - that's how drastic the difference between 3 and 5 and 4/4 is

In tax class 3, the wage tax is the lowest and the net wage is the highest.
In tax class 5, income tax is high and net wages are low.

This corresponds to unequal treatment of the spouses’ incomes. Only then does it fall not important if the money earned is shared and invested as shared money. According to the motto: All-in, with a joint account and partnership agreements on the use of money.

But that is the exception rather than the rule for married couples.

In tax class 4, the partner with the lower income in the example would have almost €3,500 more net salary at his/her disposal. That is more than 10 percent of gross annual income.

Tax class 4 taxes individually

However, tax consultants usually only recommend tax class 4 to couples with the same income. The 4/4 has so many important advantages, especially for part-time wives. Or for those who earn less in a marriage.

The tax class 4 is for employed wives in principle the right choice. (Almost) no matter how different the incomes of the spouses are. In tax class 4, everyone receives their own allowances and only pays taxes according to their own income.

Benefits of tax class 4:

1. Deductions: The amount of taxes depends on your own gross income, everyone gets their tax allowance.

2. Security: with tax class 4 there is no risk of additional tax payments

3. Fairness: Incomes are equal in partnership

4. Equal rights: Wage replacement benefits such as parental allowance and unemployment benefit are paid according to your own income

5. Psychologically: differences in wages between spouses are not increased further: those who earn a lot pay little tax, those who earn little pay a lot of tax. This can be frustrating and entrench power imbalances.

The tax class 4 even allows a certain optimization – with the so-called factor.

The factor method

In tax class 4 “with a factor”, the tax offices already take this into account during the year Spouse splitting. The incomes of the spouses are added together and the joint tax burden is calculated. Based on this, each partner is assigned “his” tax share according to income – via the factor, a simple number.

You apply for the factor at the tax office. The deadline is November 30th. It is valid for 2 years.

“Factor method” sounds complicated? Fortunately, you don’t have to do the math yourself here. The tax office does that. Simply fill out the form and bag the benefits.

You can view the tax class change form here.

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