Change of tax class regarding parental benefit for mixed income
June 1, 2014 | 30,00 EUR | answered by Anton Pernitschka
Hello,
My husband and I are currently considering whether changing tax classes in order to increase the parental allowance still makes sense.
After the birth of our child (estimated date 31.12.2014), I will stay at home for one year. My income for 2014 consists of:
1st January 2014 - 14th February self-employment: gross 3200€ (insured through the KSK)
14th February - expected until mid-November 2014: gross 2600€/net 1400€
Currently, since February I am in tax class 5, and my husband with a gross income of 4000€/net 2700€ is in tax class 3.
Now we would like to know if changing tax class still makes sense, even though it is no longer 7 months before maternity leave, as I have only been classified in tax class 5 since 15.02.14. It is also unclear to us whether, due to my self-employment, I can only claim income from the previous year 2013 or if there is a different regulation.
I hope my explanations were clear so far and a solution to our problem can be found.
Best regards,
the inquirer
Dear inquirer,
As part of an initial consultation and with your fee payment, taking into account the regulations of this forum, I would like to answer the question.
If married couples want to maximize their benefits in the first twelve to 14 months, they should switch to the right tax brackets in a timely manner, as parental leave benefits are based on the net income before the birth. The parent who takes the most parental leave should choose the cheaper tax bracket III.
Since the beginning of 2013, the "Law on Simplification of Parental Allowance Enforcement" has significantly limited the options for switching tax brackets. Parents now essentially have to be proactive even before a positive pregnancy test. The tax bracket change must be requested at least seven months before the start of the six-week maternity leave. This leaves only until the second week of pregnancy to make the switch.
If the due date is set for December 31, 2014, maternity leave begins on November 19, 2014, so the application must have been submitted by mid-April in order for it to take effect in May. The fact that the new tax bracket only applies for six months with full salary is irrelevant to the parental leave office. The crucial factor for them is not the actual net salary, but the hypothetical one. The parental leave office calculates as if the tax bracket had applied for the entire assessment period of 12 months.
If the switch is made too late, the old, less favorable tax bracket will be used. However, the mother can request that a maternity leave month be taken into account in the calculation of parental leave benefits.
Because maternity pay does not cover the full salary, the average wage for the crucial twelve months also decreases. However, compared to the tax bracket advantage, this disadvantage usually does not weigh as heavily.
If maternity leave starts later, there is also more time for a tax bracket change. After all, maternity leave time is not mandatory and can generally be varied in length.
A tax bracket change is at least worthwhile in the classic scenario where the expectant mother is employed but earns less than her husband and is therefore in the unfavorable tax bracket V. While there may be slightly less net income in the period before the birth, this can be recovered through the tax return. However, there is no compensation for the loss in parental leave benefits.
If one does not manage to make the switch in time, there is some consolation. Parental leave benefits are subject to progression proviso and therefore increase the average tax rate. Couples who receive more parental leave benefits should also be prepared for a tax demand.
Income from self-employment in 2014 cannot be claimed based on the previous year.
This response was provided based on your description of the situation. Missing or incorrect information about the actual circumstances can affect the legal outcome.
Sincerely,
Anton Pernitschka
Tax advisor
