What do I need to consider if I want to switch from tax class IV to tax class V?
November 21, 2023 | 40,00 EUR | answered by Yvonne Schreiber
Dear tax advisor,
my name is Hilde Neumann and I am currently classified in tax class IV. In my current situation, I earn more than my spouse, who is in tax class V. However, since we are both working and I am likely to continue earning more in the future, I am considering switching to tax class V in order to take advantage of tax benefits.
I have various concerns and questions regarding this switch. Firstly, I am unsure how the switch will affect my net income. Additionally, I wonder if there are any financial disadvantages that I may have overlooked. Furthermore, I am unsure if there are certain conditions or deadlines that I need to consider in order to smoothly carry out the switch.
I would like to know from you what I need to consider when switching from tax class IV to tax class V. What requirements must I meet and how can I ensure that the switch is tax-optimal for both me and my spouse? Are there any potential pitfalls to watch out for, and what specific steps do I need to take to complete the switch?
I look forward to your professional advice and thank you in advance for your support.
Sincerely,
Hilde Neumann
Dear Mrs. Neumann,
Thank you for your inquiry regarding a possible switch from tax class IV to tax class V. It is understandable that you are concerned about the impact of this change on your net income and potential financial disadvantages. It is important to be well informed before making such an important decision.
Firstly, I would like to explain how the switch from tax class IV to tax class V can affect your net income. In tax class IV, taxation is based on the splitting tariff, which means that the income of both spouses is added together and then evenly distributed between them. In tax class V, however, the income of the spouse with the lower income tax burden is taxed. This usually results in a higher tax burden for the partner in tax class V, as their income is higher than that of the partner in tax class IV.
However, there are also potential tax benefits that can result from switching to tax class V. Under certain conditions, this can lead to an overall lower tax burden for the couple. For example, it may be beneficial to switch to tax class V if one partner earns significantly less than the other and can therefore benefit from a lower tax rate.
In order to make the switch from tax class IV to tax class V, you must meet certain requirements. Typically, you will need to submit an informal application to your local tax office. This application must be signed by both spouses. There are no specific deadlines for switching tax classes, you can usually do so at any time during the current calendar year.
It is important that you seek detailed advice before switching from tax class IV to tax class V to ensure that this step is tax-optimal for you and your spouse. There are various pitfalls to watch out for, such as the question of possible tax payments or other financial consequences. A tax advisor can competently support you in this process and help you make the right decision.
I hope that this information has been helpful to you and I am happy to answer any further questions you may have.
Best regards,
Yvonne Schreiber, Tax Advisor
