In Germany, taxpayers are divided into tax classes. Belonging to a given tax class affects the amount of income tax. Therefore, it’s worth finding out what tax classes are.
1. What are tax classes?
Tax classes, or Steuerklasse, constitute the personal income tax settlement system in force in Germany. Belonging to a given tax class determines the amount of tax on the remuneration due to the taxpayer. Tax class classification also affects the amount of, among others, unemployment benefit, living allowance, sickness benefit, kindergeld.
Information on which tax class a taxpayer belongs to can be obtained from the Finanzamt (Tax Office). The taxpayer can apply to the Office for a certificate of belonging to a given tax class. Data that concerns belonging to such a class are also included in the electronic tax card, the so-called Elektronische Lohnsteuerabzugsmerkmale (ELStAM for short).
2. What are the different tax classes?
The German tax system distinguishes 6 tax classes. Belonging to a given tax class is determined by the marital and family status of the taxpayer.
Below we present a brief description of each class:
| Class number | Rules for belonging to a given tax class |
|---|---|
| 1. | • persons heading one-person households, • unmarried persons, • divorced persons, • separated persons, • persons who were widowed at least two years ago, • married persons whose spouse isn’t tax resident in Germany, • married persons whose spouse lives outside the EU Persons coming to Germany to work are automatically assigned to the 1st tax class. |
| 2. | • single parents of children for whom they receive a family allowance or a tax-free amount due to having children The condition for qualifying for this tax class is that the taxpayer shares the same household with a child. |
| 3. | • married persons whose spouse is unemployed, • married persons whose spouse is in tax class 5, • widowed persons – up to one year after the death of the spouse |
| 4. | • married couples who didn’t choose any tax class (they were assigned to this class automatically after marriage), • marriages where both spouses work and earn salaries of a similar amount |
| 5. | • married persons, but the amount of remuneration they receive differs The spouse whose income is lower is qualified for tax class 5. |
| 6. | • persons who receive remuneration from more than one employer. Having children and being married don’t affect belonging to tax class 6. A taxpayer in this class can’t benefit from tax deductions. |
3. Change of tax class
Due a change concerning life situation (e.g. marriage, separation, divorce, death of a spouse, birth of a child for whom the taxpayer has sole custody), the tax class to which the taxpayer belongs should change.
It should be noted here that in the event of marriage, the Finanzamt automatically modifies the tax class to 4. However, the taxpayer may request a change of this class to 3 or 5.
A change of tax class is carried out by the Finanzamt. For this purpose, a completed application form for changing the tax class must be submitted to the Office. The request can be made until 30 November of each year which the tax class concerns.
Married couples can only modify their tax class jointly.
As a general rule, a change of tax class can be made twice a year. It’s possible to modify the tax class more frequently only in exceptional cases.
Due to the possibility of changing the tax class, German employers download up-to-date information on the workers’ tax class belonging from the Finanzamt every month. This allows them to calculate the employees’ payroll tax in a correct way.
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