How does spousal splitting work in tax class 4?
October 12, 2023 | 30,00 EUR | answered by Babette Schneider
Dear tax advisor,
My name is Gerda Kock and I am married. My husband and I are both employed and have chosen tax class 4. We have heard that there is the possibility to obtain tax advantages through income splitting for married couples. Unfortunately, we are unsure of how exactly it works and whether it applies to us.
Our current situation is as follows: My husband earns slightly more than I do, and we have both chosen tax class 4 so far because we want to take advantage of the benefits of joint assessment. However, we are not sure if income splitting is beneficial for us and how it would affect our tax burden.
We are concerned that we might be giving away money by not using income splitting. On the other hand, we do not want to make mistakes in our tax return and end up facing tax payments later on.
Could you please explain to us how income splitting works with tax class 4 and whether it is beneficial for us in our situation? Are there any specific requirements we need to meet in order to use income splitting? What potential advantages and risks are associated with it?
Thank you in advance for your help and advice.
Sincerely,
Gerda Kock
Dear Mrs. Kock,
Thank you for your inquiry regarding the topic of splitting income for married couples in connection with tax class 4. It is understandable that you are considering whether this tax form is beneficial for you and your husband and what impact it could have on your tax burden. I will try to provide you with all the relevant information on this topic.
Income splitting is a tax regulation that allows married couples to file their income tax jointly. The incomes of both spouses are added together and divided by two. The tax burden is then calculated as if both partners had each earned half of the total income. This can potentially lead to significant tax savings, as the tax rates for jointly filed married couples are usually more favorable than for individually filed persons.
In your case, where both partners are employed and have similar incomes, income splitting could indeed be advantageous. As your husband earns slightly more than you, a joint filing could result in an overall reduction of your tax burden. It may be worth reconsidering the tax classes and possibly considering the combination of tax class 3 for the higher-earning partner and tax class 5 for the lower-earning partner.
However, there are certain requirements that must be met in order to utilize income splitting. For example, you must be married and live in a shared household. Additionally, both partners must be subject to unlimited tax liability and have their residence in Germany.
It is important that you consult a tax advisor or financial expert before making a decision on tax optimization, in order to assess the individual circumstances and options. It may also be useful to use a tax calculator to play out different scenarios and determine the potential tax benefits.
In conclusion, income splitting can be a good way to obtain tax advantages, especially for married couples with similar incomes. It is worth exploring the options and considering a change in tax classes to benefit from the tax advantages of income splitting.
I hope that this information has been helpful to you, and I am available for any further questions.
Best regards,
Babette Schneider
Tax Advisor
