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Is there a rule of thumb for the most favorable tax bracket choice for working spouses/partners?

Spouses/partners who are both employees can choose between the tax class combinations III/V or IV/IV or IV/IV with factor. In general, the following applies:

  • The tax class combination IV/IV (statutory rule; automatically formed as ELStAM upon marriage) assumes that the spouses/life partners earn the same amount and therefore leads to an equal wage tax deduction for both spouses,
  • The tax class combination III/V is designed in such a way that the sum of the tax deduction amounts for both spouses/life partners is approximately equal to the joint annual tax if the spouse/life partner with tax class III earns 60% and the spouse/life partner with tax class V earns 40% of the joint earned income. As a result, the tax deduction for tax class V is proportionately higher than for tax classes III and IV. This is also due to the fact that the basic allowance for the subsistence minimum is not taken into account in tax class V, but is taken into account in double the amount in tax class III. If the ratio of the actual wages does not correspond to the legal assumption of 60:40, this can lead to additional tax payments.
  • The tax class combination IV/IV in conjunction with the factor to be calculated by the tax office ensures that the basic tax-free amount applicable to each spouse/life partner is taken into account in the wage tax deduction by applying tax class IV and that the wage tax deduction is also taken into account by applying the factor of 0,. (always less than 1) is reduced at the same time in accordance with the effect of the splitting procedure. The factor is a tax-reducing multiplier that is calculated from the effect of the splitting procedure in the assessment if the spouses'/partners' wages differ.

Which combination is actually more favourable must be checked in each individual case. You can use the interactive tax calculator on the website of the Federal Ministry of Finance to determine the wage tax on your wages.

Note

Further information can also be found in the "Current Tip" and in the "Wage Tax Primer 2021".

 

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