Can I switch to a lower tax bracket to save taxes?
September 10, 2022 | 30,00 EUR | answered by Yvonne Schreiber
Dear tax advisor,
my name is Dennis Friedendahl and I have been working in a well-paid job for many years. Lately, however, I have noticed that a significant portion of my income is being deducted for taxes. Therefore, I have been wondering if it would be beneficial for me to switch to a lower tax bracket in order to save on taxes.
Currently, I am classified in tax bracket III, as my wife is not employed. We have two children for whom we receive child benefit. My income is higher than that of my wife, which is why I was classified in tax bracket III.
However, as I realize that a significant portion of my income is being deducted for taxes, I am wondering if it would be possible to switch to a lower tax bracket to save on taxes. I am concerned that I may be paying too much in taxes and would like to know if there is a way for me to reduce my tax burden.
Could you please explain to me if switching to a lower tax bracket would be beneficial for me and what steps I would need to take in order to do so? Are there possibly other ways to save on taxes that I should consider?
Thank you in advance for your help and advice.
Sincerely,
Dennis Friedendahl
Dear Mr. Friedendahl,
Thank you for your inquiry regarding a possible switch to a lower tax bracket in order to save taxes. As a tax advisor, I would like to help you with answering your questions.
First of all, it is important to understand how tax brackets work in Germany. There are six different tax brackets in Germany, which are based on marital status and personal situation. Tax bracket III, in which you are currently classified, is intended for married individuals whose spouse has little or no income. This tax bracket considers a higher tax-free allowance, resulting in a lower tax burden.
If you find that a significant portion of your income is being deducted for taxes and you are considering switching to a lower tax bracket to save taxes, it is important to note that a switch to a lower tax bracket does not always automatically lead to a lower tax burden. In your case, since your wife is not employed and you are classified in tax bracket III, switching to tax bracket IV may not be advisable, as this tax bracket combines the incomes of both spouses and could potentially result in a higher tax burden.
However, there are ways to save taxes that you could consider. For example, you could check if you are claiming all tax benefits, such as deductions for work-related expenses or special expenses, in your tax return. Additionally, making advance payments or utilizing tax allowances for children could reduce your tax burden.
Before considering a switch to a lower tax bracket, I recommend seeking individual tax advice to analyze your personal situation and determine the best ways to save on taxes. A tax advisor can help you find the optimal tax planning strategies for you.
I hope this information is helpful to you and I am available for further questions. Thank you for your trust and best regards,
Yvonne Schreiber, Tax Advisor
