What is the factor method in tax class IV?

The factor method is an alternative to the tax class combination III/V for employed spouses. Both partners choose tax class IV, supplemented by an individually calculated factor. This method allows for a fairer distribution of the tax burden, as taxation is proportionate to each partner's contribution to the family income.

Application

The application for the factor method can be submitted either informally to the tax office or in conjunction with an application for a tax allowance. The expected wages from the primary employment of the 2024 tax year must be stated.

Calculation of the factor

The tax office calculates the factor to three decimal places without rounding. The calculation is based on the formula:

Factor = expected income tax under the splitting procedure (“Y”) ÷ total wage tax for both spouses under tax class IV (“X”)

The calculated factor is then entered into the electronic wage tax deduction features (ELStAM) for both spouses.

Obligation to submit a tax return

As with the tax class combination III/V, spouses using the factor method are required to submit an income tax return. This is to check the actual tax burden and determine any additional payments or refunds.

The factor method offers couples with different income levels a fairer and more precise tax consideration compared to the III/V combination.