Which tax class is the best for employees with a side job?
March 25, 2022 | 40,00 EUR | answered by Babette Schneider
Dear tax advisor,
My name is Otto Rapp and I am currently working full-time as an employee in a company. However, I also have a side job to supplement my income. Now I am wondering in which tax bracket I should be classified to pay the least amount of taxes possible and still have the most net income.
Currently, I am classified in tax class I, as I am single and have no children. However, I have heard that it may be more advantageous for me to switch to a different tax class in order to pay less taxes for my side job.
I am concerned because I am not sure which tax class would be best for me and whether a switch would be worthwhile. I also wonder if I could potentially lose tax benefits from my side job if I switch tax classes.
Therefore, could you please explain to me which tax class is best for employees with a side job and whether a switch could be an option for me? Are there any special regulations or considerations I need to be aware of? I would greatly appreciate your help and advice.
Sincerely,
Otto Rapp
Dear Mr. Rapp,
Thank you for your inquiry regarding the optimal tax class for employees with a side job. It is understandable that you are thinking about how to best optimize your income tax-wise. I am happy to help you make the right decision.
First of all, it is important to know that tax class I is the standard tax class for single individuals without children. In this tax class, the highest tax rate applies, as there are no tax benefits for married individuals or single parents. However, if you have a side job, it may be advisable to switch your tax class in order to pay less taxes.
For employees with a side job, tax class VI is often recommended. In this tax class, the side income is taxed at a flat rate, which is higher than in the main job. This avoids underpaying taxes and facing a high additional payment at the end of the year. However, it may be that you have to pay slightly more taxes overall due to the higher tax rate in tax class VI.
There is also the option of choosing tax class III for the main job and tax class V for the side job. This combination can be advantageous if you earn significantly more in the main job than in the side job. With the favorable tax class III, you have more net income from the gross in the main job monthly, while more taxes are deducted in the side job. However, this evens out at the end of the year.
It is important to note that a tax class change is not unlimited. Usually, the tax class can only be changed once a year, unless there are special reasons, such as marriage or the birth of a child.
In summary, changing tax class for employees with a side job can indeed be beneficial to optimize the tax burden. However, it is advisable to consult a tax advisor beforehand to find the best individual solution.
I hope this information has been helpful to you. If you have any further questions, please do not hesitate to contact me.
Sincerely,
Babette Schneider
Tax Advisor
