Tax class reform 2023: law wants to abolish tax classes – millions of people are sorted
Millions of Germans have to adjust to a change in tax brackets. The federal government plans to abolish tax brackets 3 and 5 and to replace them with the factor method of tax bracket 4. Those affected should check the effects on their monthly net income and adjust their tax class if necessary.
The six tax classes in Germany influence how much of the salary ends up in the account. Classes 3 to 5 only apply to married couples.
The Federal Ministry of Finance is now preparing a new law to revise the tax brackets for married couples. This becomes a point from the
coalition agreement
implemented by saying:
We want to further develop family taxation in such a way that partnership responsibility and economic independence are strengthened with a view to all types of families. As part of an improved digital interaction between taxpayers and the financial administration, we will transfer the combination of tax classes III and V to the factor procedure of tax class IV, which can then be used easily and unbureaucratically and creates more fairness.
Abolition of tax classes 3 and 5
The planned changes affect married couples and registered civil partnerships, because only they can choose the tax class freely. The combinations 3/5 and 4/4 are currently possible. One partner is then in class 3, the other in class 5, or both are in tax class 4.
But why all this? By choosing the right tax classes, you can optimize the monthly net salary. For example, if a partner earns significantly more, they should choose tax bracket 3. The other then has to go to class 5 and has quite high deductions, which is more than offset by the advantages of the higher earner at the end of the month.
However, wage tax is always settled with the tax return anyway. So if you haven’t made the best choice of tax class, you’ll get less net income per month, but you can get the balance back via your tax return.
A special variant in tax class 4 is the factor method. The plans envisage that partners who use the tax class combination 3 and 5 should both be transferred to class 4 with factor methods in the future. The wage tax deducted is reduced by a factor that the tax office calculates on the basis of the expected wage tax.
Advantages and disadvantages of the plans
The idea behind the tax class reform is not bad, because in practice, the combination 3/5 regularly leads to larger back tax payments. The conversion of spouses into 4/4 with a factor is intended to result in the wage tax paid each month being very close to that actually due.
The wage tax paid should therefore be closer to reality and therefore no longer lead to major deviations in the tax return. Sounds good, but has disadvantages for some people: For example, if only one partner works, the reform will put him at a disadvantage when it comes to the monthly net income. There is then a larger reimbursement in the income tax return or larger back payments are prevented.
Sample calculation:
Partner A earns 4,000 euros gross per month, Partner B 2,000. Running that through the salary calculator (with default settings), stay per month
Net 4095 Euros
in the combination 3/5 and
4.029 Euro
in the combination 4/4 with factor 0.957 left.
2560610/
