Germany has a distinct set of tax categories depending on your status in life (married, single, etc). This class will determine exactly how much taxes you pay to the Government and changing it could result in a much larger paycheck. This post will explain the difference between the different tax categories and how to change them accordingly. There’s a chance you could save a lot of euros changing your tax class and put that towards visiting some of this beautiful country. In addition, your tax class will be absolutely key when it comes time to file a German tax return, which I go into great detail in my post about filing my own German tax return as well as determining how much unemployment money you’ll receive if you lose your job.
For those planning or thinking of moving to Frankfurt, make sure to also read why I absolutely love living in the financial capital of Germany!
If you are planning or are moving to Germany, make sure to also read about my experiences living in the country. This post is also a part of my guide to living in Frankfurt, Germany where I list out all the things you need to know as an expat in Frankfurt and Germany.
Tax Categories in Germany
Below you will find a description/criteria of the different tax categories:
|I||Those single or separated, but not falling into either categories II or III|
|II||Single and separated, with a child, entitling them to a child’s allowance.|
|IV||Married employees if both of them receive wage.|
|V||Married persons who would normally fall into class IV, but whose spouse is in tax class III (more on this later)|
|VI||Employees who receive income from other employment on other, or several different tax cards (Lohnsteuerkarte).|
As an expat, when you initially register yourself with the anmeldung which is a whole process on its own, you’ll automatically be placed into tax category 1 (single) or tax category 4 (if you’re married). If you’re married and your spouse is not in Germany, you will be put into tax class 1. Here is a breakdown of the tax brackets in Germany for single and married.
Tax class 1
Tax class I is what many expats will fall into by default. If you’re a single person, you will automatically be put into class 1. However, there are some complexities as well for those that are moving to Germany but leaving their families behind in their home countries.
If you’re single and working in Germany, you will automatically be put into tax class I. There is no way to change this and there is no reason to change it because this is exactly what Tax class 1 is for. Tax class 1 has the highest tax rate as you would expect since you are only responsible for one person, yourself.
Families that are living together in Germany
If you’re married, but you moved to Germany on your own leaving behind your spouse in their home country, then you will also be put into class 1. This is because Germany only recognizes married tax status if you’re spouse is also living in Germany with you. For as long as you’re living in Germany on your own, you will be put into class 1 and pay the higher tax rates. There’s no way to change this unless your spouse moves to the country.
However, if your spouse is an EU citizen living in Europe, Germany does recognize this as a marriage. Assuming she has no job, or is at a much lower paid job, then you could potentially change your tax class to 3 which has a significantly reduced tax rate.
Tax class 3
Tax class 3 is what many married expats will want to change their categories to. This means that one person is making significantly more money (how much is significant I’m not sure) than the other spouse. The same applies if you are the sole earner, and your significant other does not work at all. Your significant other will then be assigned tax class 5.
Being classified in Tax class 3 will mean you save a significant amount on your taxes. I’m not an expert on the numbers but I’d estimate it to be somewhere between 10% of your paycheck that you’ll be getting back. This makes sense as the Government is taking less of your paycheck as you now need to support two people instead of one.
Tax class 4
By default, when you are register in Germany as a married couple, both you and your spouse will automatically be put into class 4. class 4 is assuming both parties are working similarly paid jobs and therefore, your tax obligation will be similar to tax class 1, which is the highest tax obligation. I’ve played around with the BBX calculator and even if you make the same salaries, it’s almost always better to change to tax class 3/5 because on a combined tax rate, it is still better than having both parties in class 4.
If you both move to Germany at the same time, you will be put into class 4. If your spouse moved to Germany after you did, once you register them you will go from class 1 to class 4. If your spouse is not working, then it behooves you to change to class 3 and 5 as soon as possible as you are paying more taxes than required. The rest of this post will go into detail about how to accomplish this.
Tax class 5
Tax class 5 is the counterpart of the spouse that is in class 3. One person will always be one or the other. Being in tax class 5 means you either do not work, or are earning significantly less than you spouse who is in tax class 3.
The tax rates are actually the highest in tax class 5, even higher than tax class 1. Why would anyone want to end up in tax class 5 then? Because the alternative is both parties being in class 4 which is taxed the same as class 1. Essentially, if you’re not working, it is a no brainer because your spouse who is in class 3 will save a lot of money. However if you are working, but earn significantly less than your spouse, your tax will be a bit higher than if you were single (class 1), but your spouse will be significantly lower (class 3).
If you did not make the change and both stayed in class 4, then overall you as a couple will be paying more tax.
Difference in tax rates
Wondering how much money you’ll save if you go from tax class 1 to tax class 3? A damn lot of money it would appear. The tax rate comes down significantly when you’re in tax class 3. I used the income tax calculator at bbx.de to illustrate my example.
Assuming I earn €100,000 a year, this is what my tax picture looks like in class 1. My total taxes amounts to €29,843 or about 30%
If I change it to tax category 3, then I am only paying €21,216 a year or about 21%.
That’s a difference of €29,842 – €21,216 = €8,626. This means I am saving almost €9,000 a year or about 9% of my paycheck! This will go a long way in helping out with the cost of living in Frankfurt where I’m living and really helped me save more money to allow me to retire early at 34 having achieved financial independence.
Changing tax class in Germany
Anything to do with taxes and Finance in Germany is done through the Finanzamt, the finance authority of Germany. They review and process your end of year tax returns along with any refunds associated with it. They also control which tax class you are in. This information is then fed to your employer which take care of how much taxes are withheld from your paycheck. In order for you to change your tax class, you must change it with the Finanzamt. Simply telling your HR department you got married will do nothing because they have no control over which tax class you are and how much to withhold.
You will need to fill out a tax class change form called the “Steuerklassenwechsel” in order to go from class 4/4 to class 3/5. This form can be obtained at your local finanzamt or you can simply download it online from this link. It is two pages and there are no English translations. I’ve broken down the form to help you fill it out!
Part 1 – Steuernummer
- This is the Steuernummer which is different than your tax Identifikationsnummer. The latter is sent to you via mail and it is your permanent tax filing number for as long as you live in Germany. The Steuernummer is a unique tax filing number that the Finanzamt of your local jurisdiction gives you after you file your first tax return. If you move to another city in Germany, you will be under a different Finanzamt which will give you a different number. You can obtain this by simply going to the Finanzamt office and requesting it.
- An das Finanzamt: The location of your Finanzamt office
- Bei Wohnsitzwechsel: bisheriges Finanzamt: If you’ve moved before, the previous Finanzamt.
Part 2 – Personal Information
This part deals with the personal information of the first spousal member.
- Antragstellende Person: This is the personal tax ID number sent to you by mail from the Finanzamt and is a 11 digit number.
6: Name: Last name
7: Vorname: Firstname
- Strasse, Hausnummer: Your address
Postleitzahl: Postal Code | Wohnort: City
Verheiratet/Verpartnertseit: Date you got married | Verwitweet seit: Date you became a widow | Geschieden…: Date you divorced | Dauernd getrennt…: Date formally separated
Fill in only one of these boxes. If you’re recently married and want to switch to tax class 3/5, then fill in just the first box with your marriage date. Should match your marriage certificate
11 to 15 are for your spouse. He/She will also have an identifikationsnummer which you’ll need to put here. You don’t need to fill in 14 or 15 if you live at the same address.
Part 3 – Tax change
This is probably the most important part of the form. This part is where you choose which tax category you want to belong to, which is the whole purpose of this exercise.
- This is your previous tax class. If you’re recently married or you’re an expat and your spouse has recently joined you, you will be put into vier/vier which means four / four. This is expected because when you’re first married, you’re automatically put into 4 / 4.
This is your desired tax class. In this case, I want to be tax class 3 and my spouse to be tax class 5 so I select drei/funf or three/five. The first number corresponds to the person in lines 4 to 10, and the second number corresponds to the second part of the table (lines 11-15).
19 and 20. This is if you want to apply the changes in the current month or from the following month. Not sure why I’d wait so I select the first box.
21 to 28: Technically you’re only allowed to change your tax class once a year. This section is for if you have to change it again during the year because your spouse resumed work or something. Most of the time this is unnecessary.
Part 4 – For tax class 4 with factor
The last part on the second page is to only with changing to tax class 4 with factor. I’m not even sure what tax class 4 with a factor is so I’d think almost all expats would not use this.
- This is your income. The left column corresponds to the first spouse, and the right column is the second spouse. Put 0 if your spouse has no income.
33 and 37: This part will be blank for most people because it has to do with receiving pension income.
- This is asking you are you participating in the state pension program. If you select no, you are probably a free lancer or contractor of some sort. Everyone else is supposed to pay ino this
This is asking if you are enrolled into the state health insurance program
Monthly contributions to a private health insurance program. Only if you’re enrolled in private health insurance
Make sure to have both parties sign and date in box 43 and you’re done!
Going to the Finanzamt
Once you’re done filling this form out, you’ll need to visit the Finanzamt office in your local jurisdiction. Yes you have to go in person to change your tax withholdings in Germany which for me is a bit crazy. In the US, you just tell your HR department you got married and change some options online and that is usually the end of it. Very rarely do they request you provide a marriage certificate. But Germany is a bit more rigid so you’ll have to make time for this.
In Frankfurt, the Finanzamt is in the Banhofsviertel. No appointment scheduling is required; just show up in person during their business hours. Make sure to bring the following with you:
- Anmeldung (address registration)
- Marriage Certificate (with apostille)
- Completed Steuerklassenwechsel form
The Finanzamt in Frankfurt is at Gutleutstrasse 114 near the Bahnhofsviertel. There are multiple buildings belonging to the Finanzamt but the one where you make changes to your tax class is the building furthest east. If you get lost, just ask someone and they will point you in the right direction.
When I arrived, I got a number for my case. I waited about 10 minutes before a tax officer saw me. I handed her my filled out form and she made the changes in 5 minutes. She did not even ask me for a passport or marriage certificate!
How long do the changes take to materialize?
The Finanzamt makes the changes and it is communicated to your employer within the first 5 days of the month. Most people get paid on the 15th of the month in Germany so as long as you submit your changes before the end of the month, you’ll see it for the next month’s paycheck.
For example, if I submitted my change on July 25, the Finanzamt will communicate the changes by Aug 5 to my employer, and they will make sure it is reflected on my Aug 15 paycheck.
That’s it. Quite a painless process I must say!
Getting a tax refund for being in Tax Class 3
Let’s say you moved to Germany in February of 2019 by yourself. You’ll automatically be put into tax class 1 and taxed accordingly at those rates. Your spouse then moved to Germany in August, and you filled out the change form to change your tax class to tax class 3. From September onwards, you are in tax class 3 and paying lower taxes.
Because you changed your tax class in 2019, you are entitled to pay only tax class 3 tax rates on your income for the entire year!
However, you will not be reimbursed for this until you file your German tax return in the first half of 2020. So in this example, you’ll have paid tax class 1 rates from February to August, but tax class 3 rates from September to December.
This means that when you file your German tax return, you will receive a refund that is the difference between tax class 3 and tax class 1 for the months of February to August. This could amount to thousands of euros!
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