Which tax class applies to whom?

Choosing the correct tax class is crucial for the amount of income tax withheld monthly. In Germany, there are six tax classes based on personal circumstances. Here you can find out which tax class applies to whom.

Income Tax Class I

This tax class applies to individuals who are single, widowed, divorced, or permanently separated. Married individuals with a spouse living abroad also fall into this tax class.

Income Tax Class II

Tax class II is specifically for single parents who are entitled to the relief amount for single parents. The requirement is that they live with at least one child for whom they receive child benefit or a child allowance.

Income Tax Class III

Tax class III offers advantages for married couples if:

• One spouse is not employed or switches to tax class V.
• The spouse lives in an EU country.
• The spouse is widowed – but only in the first year after the partner's death.

Income Tax Class IV

This tax class is for married couples who live together and are both fully taxable. It is particularly suitable if both partners earn a similar income.

• Combination IV/IV: This combination is worthwhile if both spouses earn roughly the same amount.
• Factor method: With tax class IV and factor, allowances are directly included in the monthly income tax calculation. This minimises differences between monthly income tax and the actual tax liability at the end of the year.

Income Tax Class V

This tax class applies to married couples when the partner is classified in tax class III. The condition is that the spouses live together.

Income Tax Class VI

Tax class VI is applied when someone has a second job. This tax class is used for the additional income. People without a valid income tax card from the tax office are also classified in this tax class.

Conclusion: The choice of tax class directly affects the amount of monthly income tax and can facilitate financial planning. Married couples in particular should carefully review their tax class combination to optimise tax benefits.

Which tax class applies to whom?

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.

What is the factor method in tax class IV?

How can I change my tax class?

Applications for a change of tax class or for the application of the factor method are to be addressed to the tax office in the district where the spouses have their place of residence at the time of the application. The tax class is one of the wage tax deduction characteristics that are decisive for the wage tax deduction.

As a rule, an application for a tax class change or the implementation of the factor method during the course of the year can only be submitted once to the tax office at the place of residence, at the latest by 30 November. Only in cases when one spouse no longer receives an income during the year (e.g. termination of employment) or dies, the tax office at the place of residence may carry out a change of tax class or apply the factor method one more time by 30 November. The same applies if one spouse receives wages again after previous unemployment, resumes employment after parental leave or if the spouses separate permanently during the year.

The application must be made jointly by both spouses, using the form "Application for change of tax class for spouse" available from the tax office, or in conjunction with consideration of an allowance on the official form "Application for wage tax reduction".

If the factor method is chosen, the anticipated wages of the previous year from the first employment relationships of both spouses must also be stated.

How can I change my tax class?

What is the income threshold (Beitragsbemessungsgrenze)?

The income threshold for contributions is a key calculation factor in German social insurance law. It sets the maximum amount of an employee's salary or pension that is used to calculate contributions for pension, unemployment, health, and nursing care insurance. Income exceeding the respective income threshold for contributions is exempt from contributions.

Income thresholds for contributions in pension insurance 2025

General pension insurance:

• West: 8.050 Euro/month (96.600 Euro/year)
• East: 8.050 Euro/month (96.600 Euro/year)

Miners' pension insurance:

• West: 9.900 Euro/month (118.800 Euro/year)
• East: 9.900 Euro/month (118.800 Euro/year)

Income thresholds for contributions in health insurance 2025

The nationwide income threshold for contributions in statutory health insurance is 5.512,50 Euro/month (66.150 Euro/year). Income above this threshold is not considered for contribution calculation.

Compulsory insurance limit (annual income limit) 2025

The compulsory insurance limit determines the annual income at which an employee is no longer required to have statutory health insurance. From this amount, the insured person can switch to private health insurance.

• Compulsory insurance limit 2025: 6.150 Euro/month (73.800 Euro/year)

Significance of income thresholds for contributions

The income thresholds for contributions directly affect the amount of social insurance contributions and the maximum contribution burden. They are based on wage developments and are adjusted annually to ensure fair burdens for insured persons and employers.

• For insured persons: Income above the thresholds is exempt from contributions, limiting the contribution burden.
• For pension entitlements: Only contributions paid up to the threshold are included in the calculation of the pension amount.

What is the income threshold (Beitragsbemessungsgrenze)?

What is the additional contribution of the statutory health insurance?

The income-based supplementary contribution is a key instrument for financing statutory health insurance (GKV). Since its introduction on 1 January 2015 (§ 242 SGB V), it has enabled health insurance companies to flexibly close financial gaps. In 2025, the average supplementary contribution will be 2.5 percent, a significant increase compared to previous years.

The general contribution rate and the supplementary contribution in 2025

The general contribution rate to the GKV remains unchanged at 14.6 percent. However, the average supplementary contribution rises to 2.5 percent, a historic high. The actual amount varies depending on the health insurance company, so it is worth comparing the supplementary contributions. The supplementary contribution is income-based and not capped, meaning higher incomes are more heavily burdened.

Who pays the supplementary contribution?

Since 2019, the supplementary contribution has been financed on a parity basis. This means that employees and employers, as well as pensioners and the pension insurance, share the costs equally. This regulation particularly relieves employees with medium and low incomes, who had to bear the full supplementary contribution themselves before 2019.

Information obligations of health insurance companies

Each health insurance company is legally obliged to record the collection of a supplementary contribution in its statutes. Policyholders can view these at the branches or on the company's website. In addition, health insurance companies must inform their members in writing at least one month before the introduction or increase. This notification also includes information on the special right of termination, which allows members to switch companies in the event of a contribution increase.

Why is the supplementary contribution so high?

The significant increase in the supplementary contribution to 2.5 percent reflects rising costs in the healthcare sector. Higher expenditure on medical care, nursing, and innovative treatment methods is increasingly burdening health insurance companies. The supplementary contribution makes it possible to cover these costs without raising the general contribution rate.

Conclusion: The income-based supplementary contribution will remain an important element of GKV financing in 2025. The increase to 2.5 percent highlights the growing challenges in the healthcare sector. Policyholders should regularly check the supplementary contributions of their health insurance company to use the special right of termination if necessary and benefit from cheaper alternatives.

What is the additional contribution of the statutory health insurance?

How much are the contributions to long-term care insurance?

Contributions to long-term care insurance were adjusted on 1 January 2025. The general contribution rate is now 3.6% of gross income. Individuals without children continue to pay a surcharge of 0.6%, resulting in a total contribution rate of 4.2% for them.

Parents with multiple children receive discounts: the contribution rate decreases by 0.25 percentage points per child from the second child, up to a maximum of the fifth child. This regulation applies until the youngest child reaches the age of 25.

Long-term care insurance contribution rate (from 1.1.2025)

The contribution assessment limit for long-term care insurance has also been increased. In 2025, it is 5.512,50 Euro monthly or 66.150 Euro annually.

Distribution of contributions:

• Employees and employers usually share the contribution equally.
• Childless employees bear the surcharge of 0.6% alone.
• Self-employed and voluntarily insured persons pay the entire contribution themselves.
• Pensioners pay their contribution to long-term care insurance entirely on their own, without any contribution from the pension insurance.

How much are the contributions to long-term care insurance?

How do I have allowances or changes entered on my employment tax card?

Excessive taxes are often withheld during monthly payroll tax deductions. However, if you have high work-related expenses, special expenses, or extraordinary burdens, you don't have to wait until the end of the year to receive a tax refund. By applying for a payroll tax reduction, you can have these expenses entered as payroll tax allowances during the year. This increases your net salary month by month.

How does the application for a payroll tax reduction work?

With an application for a payroll tax reduction, allowances can be entered directly in the electronic payroll tax deduction features (ELStAM). This means your employer withholds less payroll tax each month. The application can be conveniently submitted to the tax office.

Forms and simplifications

The previously 6-page application form has been replaced by a main form and special annex forms. These annex forms (e.g. for children, work-related expenses, or special expenses) only need to be completed if required.

In many cases, the 2-page “simplified application for payroll tax reduction” is sufficient. This is the case if:

• the requested allowance is not higher than in the previous year, or
• only the number of child allowances has changed, for example due to the birth of a child or for children in vocational training after the age of 18.

Renewal of an existing allowance

If an application was submitted in the previous year and the tax allowances have not changed, it is sufficient to fill in the personal details and the section “payroll tax reduction in the simplified procedure” in the new main form.

Which expenses can be taken into account?

A payroll tax reduction can be applied for the following expenses:

• Work-related expenses: Only considered if they exceed 1.000 Euro (102 Euro for pensioners).
• Special expenses: Amounts exceeding the special expenses allowance of 36 Euro (72 Euro for spouses) are taken into account.
• Extraordinary burdens: For example, medical expenses or care costs.
• Relief amount for single parents: Applies to widowed or separated single parents.

The expenses must total more than 600 Euro in the calendar year to apply for a payroll tax reduction.

Important notes

Disabled persons and bereaved individuals can apply for allowances without exceeding the application limit of 600 Euro. The application for a payroll tax reduction is particularly advantageous to create financial leeway during the year.

Here you will find the most important application forms.

How do I have allowances or changes entered on my employment tax card?