Tax classes & spousal splitting (Steuerklassen / Ehegattensplitting)

Level 2 · FoundationsDE · 2026 figures

German termSteuerklassen / Ehegattensplitting

Read firstProgressive income tax

Used bySecond-earner marginal rate

Don't confuse withWithholding vs. assessment

Deep divesTax Classes (Steuerklassen)

Ehegattensplitting (spousal income splitting) is an annual mechanism: a married couple's combined taxable income is halved, taxed at individual rates, then doubled — lowering joint tax when the spouses earn unequally. Tax classes (Steuerklassen I-VI) only control monthly withholding between the spouses' paychecks. Switching class changes cash flow during the year, not the amount owed at assessment.

Why it matters

These two mechanisms get merged in everyday conversation, producing one specific wrong belief: that picking tax class III "saves tax." It doesn't. Splitting is what actually lowers the couple's bill, and it applies automatically to every couple filing jointly, regardless of which class combination funded their payslips. Confusing the two causes two costly mistakes: budgeting around a monthly "loss" in class V that is really a forced loan to the tax office, and assuming a class switch changed the family's real tax burden when it only moved money between months.

How splitting works

Splitting acts on the couple's combined income, not each spouse's income separately. Consider two illustrative households, each with €80,000 combined taxable income:

• Unequal earners: Partner A earns €60,000, Partner B earns €20,000. Taxed individually at progressive rates, A's income sits mostly in higher brackets. Under splitting, the tax office computes tax on half the combined income (€40,000), applies that rate, then doubles it — so both halves are effectively taxed at the lower rate that €40,000 attracts, not the higher rate €60,000 alone would hit.
• Equal earners: Both partners earn €40,000 each. Halving €80,000 gives €40,000 — exactly what each already earns. Splitting changes nothing here; the joint result matches what two single filers would owe on their own incomes.

The advantage is largest the further apart the two incomes sit, and shrinks toward zero as the incomes converge. A single earner with a non-working spouse sees the largest possible splitting effect.

What tax classes actually change

Class	Who it's for	What it does
I	Single, divorced, widowed	Standard monthly withholding for one person
II	Single parents	Class I plus the Entlastungsbetrag für Alleinerziehende (single-parent relief allowance)
III	Married, paired with a spouse in class V	Lowest withholding; carries both spouses' tax-free allowance
IV	Married, similar incomes	Standard withholding for each spouse independently
IV with Faktor	Married, any income split	A calculated Faktor (adjustment multiplier) scales each spouse's withholding to track the eventual joint assessment
V	Married, paired with a spouse in class III	Highest withholding of the pair; carries none of the allowance
VI	Second job, multiple employers	Highest withholding; no allowance at all

The classes are a prepayment schedule, not a tax bill. The annual Einkommensteuer (income tax) assessment — filed via the Steuererklärung (tax return) — recomputes the couple's joint liability under splitting no matter which class combination fed their payslips. Moving from IV/IV to III/V redistributes money between the two paychecks and can turn a small monthly gap into a large year-end refund or back-payment; the total owed does not move.

Classes still matter for two real things: liquidity, since the same annual bill lands on different months depending on class; and Lohnersatzleistungen (wage-replacement benefits) such as Elterngeld (parental allowance), Arbeitslosengeld I (unemployment benefit), and Krankengeld (sick pay), which are calculated from net pay — so the class in force during the reference period changes the benefit paid out, even though it changes nothing about tax owed. The Faktor option keeps withholding close to the true annual liability throughout the year; whether it fits a household depends on that household's own liquidity and benefit-timing situation.

Don't confuse with

Withholding (Lohnsteuerabzug) is what the employer deducts each payslip, based on the tax class in force that month. Assessment (Veranlagung) is the Finanzamt's (tax office) recalculation of the full year's liability once the return is filed, using the couple's actual combined income under splitting. The class changes when the money moves; the assessment fixes how much is owed.

Check yourself

A couple switches from tax class IV/IV to III/V. Their monthly net pay shifts — one spouse takes home more, the other less. Switching to III/V lowered our monthly deductions — did it reduce the couple's annual tax?

Yes — class III applies a lower tax rate to that spouse's incomeNo — the annual assessment recomputes the same joint liability under splitting regardless of which class combination the couple usedOnly if one spouse doesn't file a tax returnIt depends on how different the two incomes are

For which couple does Ehegattensplitting produce the largest reduction in joint tax, compared to what the same two incomes would owe filed separately?

Two spouses earning identical incomesA single earner with a non-working spouse, or any couple with a large income gapTwo spouses who both earn incomes at the very top of the tax scheduleThe splitting effect is the same size for every income combination

Which statements about German tax classes (Steuerklassen) are accurate? Select all that apply.

They determine how much income tax is withheld from each spouse's monthly paycheckThey determine the couple's total annual income tax liabilityThey can affect the amount of Elterngeld (parental allowance) a spouse receives, because Elterngeld is calculated from net paySwitching classes requires re-filing all previous years' tax returns