What effects does a change in tax class have on my payroll?
January 9, 2022 | 30,00 EUR | answered by Friedhelm Peters
Dear tax consultant,
My name is Theodor Otremka and I have been working in a medium-sized company for many years. In the past few months, I have been intensively dealing with the topic of tax classes and am now considering whether a change in my tax class would be advisable. Currently, I am classified in tax class III and my wife in tax class V. We have two children and I earn significantly more than my wife. Due to the current tax class choice, we are paying relatively high taxes monthly and I am wondering if there might be a better alternative.
My concern is that by choosing the wrong tax class, we may be paying too much money to the tax office and therefore have less net income available at the end of the year. Therefore, I would like to know what specific implications a change in tax class could have on my monthly payroll. Is there a combination that would be more favorable for us as a family? What do we need to consider in case of a change and what steps do we need to take?
I look forward to your expertise and hope that you can help me with my decision. Thank you in advance.
Best regards,
Theodor Otremka
Dear Mr. Otremka,
Thank you for your inquiry regarding the topic of tax brackets. It is good that you are closely examining this and considering whether a change in your tax bracket would be beneficial. Currently, you are in tax bracket III and your wife is in tax bracket V. You have two children and earn significantly more than your wife.
With the current tax bracket selection, you may be paying too much in taxes and could have less net income available at the end of the year. Therefore, a change in tax bracket could indeed be beneficial in optimizing your financial situation.
A more favorable alternative for your family could be the combination of tax bracket IV for you and tax bracket IV for your wife. With tax bracket IV/IV, both spouses are treated equally for tax purposes and there is individual taxation of incomes. This can result in an overall lower tax burden and thus a higher net income.
When changing tax brackets, it is important to note that this can only be done once a year on January 1st. Therefore, you should act promptly to potentially make a change for the upcoming year. To do so, you must submit a request for a tax bracket change to your local tax office. This request must be signed by both spouses.
It is advisable to seek advice from a tax advisor before changing tax brackets to ensure that the new choice will indeed improve your financial situation. Each individual situation is different and there is no one-size-fits-all recommendation for the optimal tax bracket combination.
I hope this information helps you in your decision-making process. If you have any further questions, please feel free to contact me.
Best regards,
Friedhelm Peters
