Income tax class

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Income tax cards - obsolete since 2013

The wage tax class determines the wage tax deduction as well as the deduction of solidarity surcharge and, if applicable, church tax for income from employment in Germany . The Income Tax Act has six income tax classes, especially the marital status depend. Since the end of the wage tax cards , the wage tax class has been entered in the electronic wage tax deduction features (ELStAM) .

Income tax brackets

The use of income tax brackets arises from the problem that the employer only knows the gross wages in this employment relationship, but not the entire taxable income of the employee - but this would have to be taken into account when calculating income tax. Therefore, every employee is assigned an income tax class. This wage tax class determines the calculation rules and specifically the predefined exemptions to be taken into account for wage tax.

The wage tax brackets only affect the amount of wage tax. If an income tax return is submitted (which is mandatory in some income tax brackets), the final tax liability is only determined in the annual income tax return, on which the income tax bracket has no influence.

The wage tax class of an employee is basically determined by legal regulations. Married people / life partners can, however, choose between the combinations IV / IV, III / V and IV / IV with factor. Since 2020, spouses / life partners who are both working can have their tax class changed as often as they want ( Section 39 (6) EStG).

Income tax class I

The following employees fall into tax class I:

  • Unmarried persons, unless they fall into a different tax class
  • Married / partnered whose spouse / partner limited tax liability is
  • Married people who live permanently apart, including widows (from the year after next after the death of the spouse / life partner)

The number of child allowances is entered in the electronic wage tax deduction characteristics.

Income tax class II

Tax class II applies to single parents who meet the requirements of tax class I and are entitled to the relief amount for single parents .

For widows with at least one child, this tax bracket applies from the beginning of the month following the month in which the spouse died. However, the so-called widow splitting works here . The widow splitting means that the lower tax rate of the joint assessment is also applied in the year after the spouse died.

Income tax class III

Tax class III applies to:

  • Employees who are married or live in a registered civil partnership, do not live permanently separated from their spouse / life partner and have not chosen tax class IV. If the spouse / partner is also employed, he or she receives tax class V.
  • Widowed in the year in which the spouse / life partner died and in the following year. The deceased must have been subject to unlimited income tax at the time of his death. The spouses / life partners must not have lived permanently apart until the time of death.

In tax class III, the wage tax is calculated so that it corresponds to the income tax that arises if the other partner has no income. Choosing tax class III therefore makes sense if the other partner has little or no income.

Income tax class IV

Married / partnered employees fall into tax class IV if both partners are subject to unlimited income tax and do not live permanently apart and they do not choose the combination III / V.

In tax class IV, wage tax is calculated in the same way as for single persons with tax class I ( Section 39b (3) sentence 6 EStG). This means that there is no income tax refund or additional payment if both partners earn the same amount. The choice of tax class IV / IV (as opposed to III / V) should therefore be chosen by spouses / civil partners with whom both earn roughly the same amount.

In contrast to the combination III / V, an income tax return does not always have to be submitted when choosing tax class IV / IV ( Section 46 ). However, since too much tax is withheld during the year with tax class IV / IV - especially if the partners have very different incomes - filing a tax return usually leads to a tax refund.

Income tax class IV factor

Since 2010, married couples have been able to choose the “tax class combination IV / IV with factor” through the newly introduced § 39f . The income tax for each partner is calculated as in tax class IV and then reduced by multiplying it by a factor (which is always less than one).

The factor is calculated by the tax office when applying for the tax class based on the expected income. To calculate the factor ("F"), the probable income tax in the splitting procedure (sum "Y") is divided by the probable wage tax of both partners according to tax class IV (sum X).

Advantages of the factor method: As with the IV / IV combination, the tax liability is divided fairly between both spouses during the year, but at the same time, unlike the IV / IV combination, the splitting advantage is taken into account. In addition (unlike the combinations III / V or IV / IV) the wage tax to be paid comes very close to the final income tax, so that only minor back payments or reimbursements can be expected.

The tax class IV-Faktor / IV-Faktor is therefore suitable for all married couples in which both spouses have income from employment.

Income tax class V

Tax class V is to be applied ( Section 38b, Paragraph 1, No. 5 ) if both spouses / partners apply to classify the other spouse / partner in tax class III. This will be the case if the spouses / life partners have very different incomes. If the higher earner receives tax class III and the lower earner receives tax class V, too little tax may be withheld (higher liquidity during the year). Submitting a tax return at the end of the year is therefore mandatory ( Section 46 Paragraph 2 No. 3a ), provided both spouses have received an income.

Income tax class VI

Income tax class VI is entered if an employee has a second or further employment relationship. In addition, the employer is obliged to withhold wage tax in accordance with tax class VI if the employee culpably fails to provide the electronic wage tax deduction features. This income tax bracket causes the highest tax burden because no tax exemptions are taken into account other than the old-age tax relief . Since the income from the first employment relationship is not known, much more is withheld here than in the other tax brackets.

Combination of tax brackets for couples

Depending on the choice of tax class, there are different distributions of the tax burden between the partners and different times of tax payment: If a couple collectively earns EUR 60,000, the joint tax burden is always EUR 8,374 if they are married or a partner. If they are not married or have a partner, the tax burden is between 8,374 EUR (if both earn the same amount) and 13,955 EUR (if only one earns).

  • married / partnered, both tax class IV
    • If both earn the same, then both pay € 4,187, together € 8,374 (also when using the factor method).
    • If one partner earns € 20,000 and the other € 40,000, the wage tax (without using the factor method) is € 1,747 + € 6,930 = € 8,677, of which € 303 will be reimbursed later based on the income tax return. When using the factor method, the factor is 8.374 / 8.677 = 0.965 (it is always rounded to three decimal places). The spouses / life partners pay € 1,686 + € 6,688 = € 8,374.
    • If one partner earns € 60,000 and the other nothing, the wage tax is € 13,955 + € 0 = € 13,955. € 5,581 will be reimbursed later based on the income tax return. When using the factor method, the factor is 8,374 / 13,955 = 0.600. The spouses / life partners pay € 8,374 + € 0 = € 8,374 tax.
  • married / partnered, tax classes III and V
    • If both earn the same, they pay € 1,594 + € 7,394 = € 8,988 income tax. 614 € will be reimbursed later based on the income tax return.
    • If one partner earns € 20,000 in tax class V and the other in tax class III € 40,000, they pay € 4,114 + € 3,804 = € 7,918. 456 € must be paid later based on the income tax return.
    • If the partner earns € 60,000 in tax class III and the other earns nothing, they pay € 9,004 tax. 630 € will be reimbursed later based on the income tax return.
  • unmarried, both tax class I.
    • If one partner earns € 60,000 and the other nothing, € 13,955 tax has to be paid. If the earning partner pays the other “maintenance for needy persons” as part of the “extraordinary burdens”, he can deduct the maintenance up to the amount of the basic allowance (€ 8,652), in addition to the costs for health insurance etc. for the partner to be paid. This reduces his tax liability to a maximum of € 10,871.
    • If both partners earn € 30,000 each, they each pay € 4,187 in taxes, i.e. € 8,374 together, as much as married couples in this situation.
    • If one partner earns € 20,000 and the other € 40,000, they together pay € 1,747 + € 6,897 = € 8,644.
    • If one partner earns € 11,000 and the other € 49,000, they together pay € 40 + € 9,784 = € 9,824.

Tax class change

Responsibility for changing the wage tax deduction criteria was transferred from the registration authorities to the tax offices on January 1, 2012 (Section 39 (1) and (2) EStG). The tax office must be notified of any change in the requirements for the tax class. The tax office then changes the income tax class. The change to a tax class that is more favorable for the employee is only possible at the free application of the employee (Section 39 Paragraphs 5 to 7 EStG), in the case of spouses of both partners (except when changing to the tax class combination IV / IV). The tax class could only be changed once a year (exception: death of spouse or partner, unemployment and resumption of employment). Since 2020, the tax class can be changed as often as you like.

So that the change can still be taken into account for the December wage tax accounting period, the complete application must be submitted to the responsible tax office by November 30th of a calendar year at the latest.

Allowances

The wage tax brackets differ from one another in that they have different amounts of exemption (in EUR). They are derived from the tax exemptions on which the income tax assessment is based.

Allowances 2020

Tax class I. II III IV V VI
Basic allowance 9408 9408 18816 9408 No No
Employee lump sum 1000 1000 1000 1000 1000 No
Special expenses lump sum 36 36 36 36 36 No
Pension flat rate * Yes Yes Yes Yes Yes Yes
Single parent relief No 1908 No No No No
Child allowance per child 7812 7812 7812 3906 No No

Allowances 2018

Tax class I. II III IV V VI
Basic allowance 9000 9000 18000 9000 No No
Employee lump sum 1000 1000 1000 1000 1000 No
Special expenses lump sum 36 36 36 36 36 No
Pension flat rate * Yes Yes Yes Yes Yes Yes
Single parent relief No 1908 No No No No
Child allowance per child 7428 7428 7428 3714 No No

Allowances for 2016 and earlier

Development of tax exemptions

2009 allowances

Tax class I. II III IV V VI
Basic allowance 7834 7834 15668 7834 No No
Employee lump sum 920 920 920 920 920 No
Special expenses lump sum 36 36 72 36 No No
Flat rate pension yes * yes * yes * yes * No No
Single parent relief No 1308 No No No No
Child allowance per child 6024 6024 6024 3012 No No

2010 allowances

Tax class I. II III IV V VI
Basic allowance 8004 8004 16008 8004 No No
Employee lump sum 920 920 920 920 920 No
Special expenses lump sum 36 36 36 36 36 No
Flat rate pension yes * yes * yes * yes * yes * No
Single parent relief No 1308 No No No No
Child allowance per child 7008 7008 7008 3504 No No

Allowances 2011 and 2012

Tax class I. II III IV V VI
Basic allowance 8004 8004 16008 8004 No No
Employee lump sum 1000 1000 1000 1000 1000 No
Special expenses lump sum 36 36 36 36 36 No
Flat rate pension yes * yes * yes * yes * yes * yes *
Single parent relief No 1308 No No No No
Child allowance per child 7008 7008 7008 3504 No No

Allowances 2013

Tax class I. II III IV V VI
Basic allowance 8130 8130 16260 8130 No No
Employee lump sum 1000 1000 1000 1000 1000 No
Special expenses lump sum 36 36 36 36 36 No
Flat rate pension yes * yes * yes * yes * yes * yes *
Single parent relief No 1308 No No No No
Child allowance per child 7152 7152 7152 3576 No No

Allowances 2014

Tax class I. II III IV V VI
Basic allowance 8354 8354 16708 8354 No No
Employee lump sum 1000 1000 1000 1000 1000 No
Special expenses lump sum 36 36 36 36 36 No
Flat rate pension yes * yes * yes * yes * yes * yes *
Single parent relief No 1308 No No No No
Child allowance per child 7008 7008 7008 3504 No No

2015 allowances

Tax class I. II III IV V VI
Basic allowance 8472 8472 16944 8472 No No
Employee lump sum 1000 1000 1000 1000 1000 No
Special expenses lump sum 36 36 36 36 36 No
Pension flat rate * Yes Yes Yes Yes Yes Yes
Single parent relief No 1908 No No No No
Child allowance per child 7152 7152 7152 3576 No No

Allowances for 2016

Tax class I. II III IV V VI
Basic allowance 8652 8652 17304 8652 No No
Employee lump sum 1000 1000 1000 1000 1000 No
Special expenses lump sum 36 36 36 36 36 No
Pension flat rate * Yes Yes Yes Yes Yes Yes
Single parent relief No 1908 No No No No
Child allowance per child 7248 7248 7248 3624 No No

* The pension lump sum depends on the gross wage, so no generally applicable amount can be shown. Legal source: Section 39b (2) sentence 6 EStG

Child allowance

When determining the income tax , the child allowances are not taken into account. They are only taken into account when determining the solidarity surcharge and church tax ( Section 51a (2) sentence 1 EStG ). Only for this purpose is the number of child allowances stored in the wage tax deduction criteria. The cheaper check with child benefit is only carried out as part of the income tax return .

Final tax liability

The final tax liability is only determined after the end of a calendar year through an income tax assessment . The withheld income tax is offset against income tax. If more wage tax has been withheld than is determined in income tax, an income tax refund results. If the fixed income tax is higher than the withheld income tax, an additional income tax payment is due.

Choosing income tax brackets (e.g. III / V instead of IV / IV for married couples) therefore does not result in any definitive tax advantages.

It should also be noted that tax offices according to Section 37 (5) sentence 1 EStG can issue an advance payment notice in the course of the income tax assessment from an expected additional payment of 400 euros in the following year, so that there is hardly any liquidity advantage during the year.

Influence on wage replacement benefits

The choice of tax class influences the amount of certain wage replacement benefits such as unemployment benefit , maintenance , sickness benefit , pension sickness benefit , injury benefit , transition benefit , maternity benefit or parental benefit . The choice of tax class or the change of tax class influences the amount of the compensation payment. In its judgment of June 25, 2009, the Federal Social Court did not see any abuse in changing the wage tax class, but sees this as “a permissible structuring option” to receive a higher net income and thus a higher parental allowance. The ruling is surprising because other rulings on wage replacement benefits and the choice of tax class assumed abuse. For example with maternity benefits.

Criticism and reform

There is criticism of the current wage tax class system in Germany and a reorganization of the wage tax deduction is being discussed. The parties Bündnis 90 / Die Grünen , Die Linke and the FDP are calling for the abolition of wage tax classes III and V. However, the first two parties completely abolish spouse splitting (i.e. the distribution of the family's total income when taxing is divided equally between both partners) want, the Liberals want to keep it in principle. In their view, studies have shown that in the system of spouse splitting, tax class V in particular reduces the work incentives for the second earner, and the more so, the further the income of the spouses is apart. The high relative tax burden is therefore not accepted by those affected.

This applies all the more when switching from a mini-job to a normally taxed employment relationship: The mini-jobs are subject to a flat tax of 2 percent and little or no social security contributions on the part of the employee. You are therefore not affected by the high tax burden of income tax class V. A change from a mini job to a better-paid employment relationship therefore has the consequence in tax class V that the tax burden skyrockets. In addition, there is the higher burden of social security contributions.

In 2009, it was decided to introduce class IV with factor. This was officially justified by the fact that there was previously too little incentive to take up work in tax class V or to switch from III to IV.

history

1939-1945

The wage tax classes were first introduced with the 1939 wage tax implementation regulation. At that time, however, the term control groups was still used. There were 4 tax groups with the following classification:

  • Tax group I: unmarried workers
  • Tax group II: childless married workers whose marriage has lasted more than 5 years
  • Tax group III: childless married workers whose marriage has lasted less than 5 years.
  • Tax group IV: Employees who are entitled to a child tax credit

Special rules applied to Jews. No separate tax class has been defined for the second and other tax cards. Rather, an additional amount was entered on such tax cards.

1946-1949

Law No. 12 of the Allied Military Government of February 11, 1946 also reorganized the tax brackets. The law came into effect retrospectively on January 1, 1946. With the implementation of this law, the term tax class was introduced and there were only 3 tax classes.

  • Tax class I: Unmarried persons and persons who were married for less than 4 months at the beginning of the assessment period.
  • Tax class II: People who were married for at least 4 months at the beginning of the assessment period and people who had reached the age of 65 at least 4 months before the start of the assessment period
  • Tax class III: people who are entitled to a child discount

An additional amount was also entered on the second and each subsequent tax card.

On June 16, 1949, the new version of the Wage Tax Implementation Ordinance (LStDV 1949) came into force retrospectively to January 1, 1949, with the 4-month regulation for tax classes I and II no longer being applicable.

1950-1958

The tax classes were reorganized as follows through the wage tax implementation regulation 1950:

  • Tax class I: unmarried employees who do not belong to tax class II or III
  • Tax class II: Employees who do not belong to tax class III and who
    • until the assessment period 1954
      • have reached the age of 60 or
      • have reached the age of 50 if they are widowed
    • from the assessment period 1955
      • are married, even if they are permanently separated
      • are unmarried and have reached the age of 55
      • are widowed and were born before January 1, 1905, and were widowed before the end of 1954.
  • Tax class III: Employees who are entitled to a child allowance
  • Additional note "Z" in tax classes II and III from the assessment period 1957
    • unmarried workers
    • married employees if a tax card was also issued for the woman or if one spouse was not subject to unlimited tax liability

Tax class I was entered on the tax card of wives from the assessment period 1955, unless otherwise

  • no tax card was issued for the husband
  • It is obvious that the spouses have no other taxable income, that no income tax is payable when they are assessed together, or that the spouse is not subject to unlimited tax liability
  • at the request of both spouses, if tax class I is entered on the husband's tax card.

An additional amount was still entered on the second and each additional tax card.

1959-1969

The tax classes were reorganized again through the 1959 wage tax implementation ordinance. There were again 4 tax classes which were expanded to 6 tax classes from 1965 with the following classification:

  • Tax class I: Employees who have not yet reached the age of 50 and who are not entitled to a child allowance,
    • who are single or divorced
    • are widowed and do not belong to tax class III
    • are married and do not belong to tax brackets III or IV
  • Tax class II: Employees who have reached the age of 50 or who are entitled to a child allowance and
    • who are single or divorced
    • are widowed and do not belong to tax class III
    • are married and do not belong to tax brackets III or IV
  • Tax class III: Employees who are entitled to a child allowance and
    • who are married and not permanently separated and where both spouses are subject to unlimited taxation
    • who are widowed for the calendar year in which the spouse died and the following calendar year, as well as widowed persons who are entitled to a child allowance for a child from the marriage with the deceased
  • Tax class IV: married employees who are entitled to a child allowance and for whom both spouses are subject to unlimited tax and both spouses receive wages.

The second and every subsequent control card was identified by a special pattern until 1964.

From the assessment period in 1965, two further tax brackets were introduced:

  • Tax class V: for employees whose spouses are registered in tax class III
  • Tax class VI: for the second and each additional tax card

1970-1974

The 1970 wage tax implementation ordinance essentially changed the age limits for tax classes I and II.

  • Tax class I: Employees who have not yet reached the age of 49 at least 4 months before the start of the assessment period and who are not entitled to a child allowance,
    • who are single or divorced
    • are widowed and do not belong to tax class III
    • are married and do not belong to tax brackets III or IV
  • Tax class II: Employees who have reached the age of 49 at least 4 months before the start of the assessment period or who are entitled to a child allowance and
    • who are single or divorced
    • are widowed and do not belong to tax class III
    • are married and do not belong to tax brackets III or IV
  • Tax class III: Employees who are entitled to a child allowance and
    • who are married and not permanently separated and where both spouses are subject to unlimited taxation
    • who are widowed for the calendar year in which the spouse died and the following calendar year, as well as widowed persons who are entitled to a child allowance for a child from the marriage with the deceased
  • Tax class IV: married employees who are entitled to a child allowance and for whom both spouses are subject to unlimited tax and both spouses receive wages.
  • Tax class V: for employees whose spouses are registered in tax class III
  • Tax class VI: for the second and each additional tax card

Since 1975

From the assessment period 1975 onwards, the tax brackets were regulated in the Income Tax Act. The new § 38b EStG was inserted. At the same time, the classifications in the tax classes were changed:

  • Tax class I: employees who
    • who are single
    • are married, widowed or divorced and do not belong to tax bracket III or IV
  • Tax class II: employees who
    • have reached the age of 49 before the start of the assessment period (until 1981)
    • have at least one child (since 2004 only single parents)
  • Tax class III: employees who
    • who are married and not permanently separated and
      • where both spouses are fully taxable and
      • the employee's spouse does not receive any wages or is classified in tax class V.
    • who are widowed for the calendar year in which the spouse died and the following calendar year, as well as widowed persons who are entitled to a child allowance for a child from the marriage with the deceased
    • whose marriage was dissolved in the year the marriage was dissolved
  • Tax class IV: married employees for whom both spouses are fully liable to tax and both spouses receive wages.
  • Tax class V: for employees whose spouses are registered in tax class III
  • Tax class VI: for the second and each additional tax card

Individual evidence

  1. ↑ a b Amendment of Section 39 (6) EStG through Article 6 No. 3 of the Third Bureaucracy Relief Act
  2. ↑ Section 39b (2) sentence 6 EStG
  3. ↑ Leaflet on the choice of tax class for 2020. Federal Ministry of Finance, November 20, 2019, accessed on March 6, 2020 .
  4. ↑ Tax class 4: The advantages of the factor method. Retrieved December 6, 2019 .
  5. ↑ Tax prepayment also possible for employees? Vereinigte Lohnsteuerhilfe eV, April 2, 2020, accessed on May 12, 2020 .
  6. ↑ Higher advance payments for tax class III / V: In many cases, countermeasures can be taken. March 8, 2011, accessed May 12, 2020 .
  7. ^ Federal Social Court, judgment of June 25, 2009; B 10 EG 4/08 R
  8. ↑ Fight against the unpopular tax class V. In: Süddeutsche Zeitung (online edition). January 2, 2013, accessed January 2, 2013 .
  9. ^ FDP parliamentary group (Ina Lenke and others): Application to abolish tax class V - reorganize wage tax deduction (PDF; 50 kB); German Bundestag printed matter 16/3649, 16th electoral term November 29, 2006; P. 1
  10. ↑ [RGBl. I 1939 p. 449]
  11. ↑ [WiGBl. 1949 p. 157]
  12. ↑ LStDV 1950
  13. ↑ LStDV 1959
  14. ↑ LStDV 1970
  15. ↑ Income Tax Act 1975

Web links

Wiktionary: income tax class  - explanations of meanings, word origins, synonyms, translations