What does collective investment mean?
Joint assessment is a tax procedure in which spouses or civil partners submit a joint tax return. It allows for more favourable taxation through the so-called spouse splitting, which is particularly beneficial for couples with different incomes.
How does joint assessment work?
- Combine incomes: The incomes of both partners are first added together.
- Halve the total income: The combined income is halved to determine the so-called splitting income.
- Calculate income tax: The tax is calculated based on the halved income.
- Double the tax: The tax calculated for the half income is doubled. The result is the income tax the couple has to pay in total.
This procedure ensures that the higher income of one partner is tax-relieved by being offset against the lower income of the other partner.
Who can use joint assessment?
Joint assessment is generally only available to married couples or civil partners. The following rules also apply:
- Newlyweds: Couples can choose between joint assessment and individual assessment in the year of marriage.
- Divorced couples: In the year of divorce, there is also a choice between the two assessment types.
- Widowed: If a spouse dies, the surviving partner can still use joint assessment in the year of death.
Advantages of joint assessment
Joint assessment is particularly advantageous for couples with large income differences. The splitting procedure results in the total income of a couple being taxed lower than if both partners were assessed separately.
Example: One partner earns 60.000 Euro a year, the other 20.000 Euro. Through spouse splitting, the income is more evenly distributed between both partners, resulting in a lower tax burden.
When is individual assessment more beneficial?
In some cases, individual assessment may offer advantages, for example:
- If both partners have similarly high incomes.
- If one partner wishes to claim high work-related expenses or special expenses that would not be fully effective in a joint assessment.
Conclusion: Joint assessment offers spouses and civil partners a way to save taxes through spouse splitting. It is especially beneficial when the partners' incomes are very different. However, couples should check whether individual assessment is more favourable in their specific case.
What does collective investment mean?
Are married couples allowed to file separate tax returns?
Married couples who are both subject to income tax can choose between joint assessment and individual assessment. The choice of assessment type affects both the tax burden and the administrative effort.
Joint assessment
With joint assessment, both spouses submit a joint tax return. All income from both partners is combined, and the so-called spouse splitting is applied. This splitting method is particularly advantageous if one spouse earns significantly more than the other, as it can lead to tax relief.
Individual assessment
In contrast, with individual assessment, each spouse submits their own tax return. Income and tax deductions are considered individually. This type of assessment is useful if both partners have similar incomes or if certain tax benefits, such as work-related expenses or extraordinary burdens, are to be claimed separately.
Influence of a marriage contract
If there is a marriage contract, especially in the case of joint property, this should be indicated in the tax return. Joint property means that the separate assets of the spouses become joint assets. This can have tax implications, for example, the non-recognition of employment contracts between spouses by the tax office.
Conclusion: Married couples have the option to submit their tax returns separately or jointly. The optimal type of assessment depends on individual income situations and tax planning options. A tax advisor or appropriate tax software can help determine the best option.
Are married couples allowed to file separate tax returns?
What are the advantages and disadvantages of a joint assessment?
Joint assessment is a type of assessment for married couples where both partners submit a joint tax return. The incomes of both spouses are combined, and the so-called spouse splitting is applied. This procedure has advantages and disadvantages that vary depending on income circumstances.
Advantages of joint assessment
- Lower tax rate with income differences: Through spouse splitting, the combined incomes of the spouses are halved, the income tax for this halved income is calculated and then doubled. This leads to a lower average tax rate if the partners' incomes are different.
- Tax relief: Couples where one partner has a high income and the other has a low or no income benefit significantly from joint assessment.
Disadvantages of joint assessment
- No advantage with equal incomes: If both spouses earn roughly the same amount, joint assessment offers no tax advantage compared to individual assessment.
- Commitment to joint declaration: Both partners are bound to the joint tax return, which makes individual tax consideration difficult.
Requirements
- Both spouses are married to each other.
- Both are fully taxable.
- They have lived together for at least one day of the tax year.
Automatic choice of joint assessment
If no type of assessment is selected on the main form of the tax return, the tax office will automatically carry out a joint assessment.
Conclusion: Joint assessment is particularly advantageous for couples with significantly different incomes. For equal incomes or specific tax situations, individual assessment may be more sensible. A tax advisor or tax software can help make the optimal choice.
What are the advantages and disadvantages of a joint assessment?
How do you choose the right assessment type for married couples?
Married couples can decide each year whether to choose joint assessment or separate assessment for spouses. The decision is either indicated directly in the tax return or communicated to the tax office through an informal declaration.
Criteria for choosing the type of assessment
- Joint assessment: Advantageous if one partner earns significantly more than the other, as the spouse splitting leads to a lower tax burden.
- Separate assessment: Sensible if both partners have similar incomes or if individual tax benefits, such as work-related expenses or extraordinary burdens, are to be claimed separately.
Support from tax programmes
Choosing the optimal type of assessment can be complex. When using Lohnsteuer kompakt, the programme supports you by automatically calculating which type of assessment is financially more advantageous for you. This ensures that you do not pay unnecessary taxes.
Conclusion: A careful review of income situations and tax deduction options is crucial to choose the optimal type of assessment. Tax programmes or a tax advisor offer valuable assistance in this decision.
How do you choose the right assessment type for married couples?
Why might separate assessment be beneficial for wage replacement benefits?
In certain cases, individual assessment for spouses may be more advantageous, especially if only one spouse receives tax-free wage replacement benefits (e.g. unemployment benefit, parental benefit or sickness benefit), while the other partner receives only taxable income.
The impact of the progression clause
With joint assessment, the tax-free wage replacement benefit increases the tax rate for the total income of both spouses, even though this benefit itself is tax-free. This leads to a higher tax burden on the taxable income.
Advantages of individual assessment
- No impact of the progression clause: The spouse without wage replacement benefits is not affected by the higher tax rate.
- Individual tax calculation: Each spouse pays only the tax on their own income.
Important consideration
Although the splitting tariff of joint assessment is not available with individual assessment, the relief from avoiding the progression clause may outweigh this disadvantage. It is advisable to calculate both options to find the most tax-efficient solution.
Conclusion: If one spouse receives tax-free wage replacement benefits, individual assessment is an option worth considering. Tax programmes such as Lohnsteuer kompakt or advice from a tax expert can help make the optimal decision.
Why might separate assessment be beneficial for wage replacement benefits?
What is the solidarity surcharge?
The solidarity surcharge (Soli) is a supplementary levy on income, wage, and corporation tax. It was originally introduced in 1991 to finance the costs of German reunification and to balance economic differences between East and West Germany.
Who pays the solidarity surcharge?
The solidarity surcharge is levied on taxpayers whose income tax or corporation tax exceeds a certain allowance. Since 2021, the Soli has been abolished or reduced for around 90% of taxpayers. Only taxpayers with high incomes continue to pay it in full.
Rate of the solidarity surcharge
The solidarity surcharge is 5.5% of the assessed income tax, wage tax, or corporation tax. Taxpayers with lower incomes are protected by an allowance.
- Allowance for income tax: Taxpayers do not pay the solidarity surcharge if their income tax is below 19.450 Euro per year (38.900 Euro for jointly assessed couples) in 2025.
- Reduction zone: If the income tax is just above the allowance, the solidarity surcharge is gradually increased until it reaches the full rate of 5.5% for higher incomes.
Use of revenue
The revenue from the solidarity surcharge goes to the federal government and is used to cover general budget expenses. It was originally used to finance German reunification and for economically weak regions.
Criticism and outlook
The solidarity surcharge remains controversial despite its partial abolition. Critics call for its complete abolition, as the original purposes, such as the reconstruction of East Germany, have largely been fulfilled.
Conclusion: The solidarity surcharge was a significant contribution to financing German reunification for decades. Since 2021, however, only taxpayers with high incomes pay it. Tax programmes such as Lohnsteuer kompakt automatically indicate whether and to what extent the solidarity surcharge is due.
What is the solidarity surcharge?
How much is the church tax?
The church tax is a tax paid by members of certain religious communities in Germany. Its rate varies depending on the federal state:
- In Baden-Württemberg and Bavaria, the church tax is 8% of the assessed income tax.
- In all other federal states, the rate is 9% of the assessed income tax.
How is the church tax calculated?
The church tax is calculated based on the income tax assessed after deducting all applicable allowances and tax benefits. It increases accordingly with rising income.
Special features of the church tax
- Church tax deductible as a special expense: The church tax paid can be deducted as a special expense in the tax return, thereby indirectly reducing the tax burden.
- Automatic deduction: The church tax is deducted directly from salary or pension, similar to income tax.
Exemption from church tax
Members can avoid the church tax by leaving their religious community. The withdrawal must be officially declared at the registry office or a comparable authority and is automatically reported to the tax office. However, this usually means that church services such as weddings, baptisms, or funerals are no longer available.
Conclusion: The church tax in Germany is 8% or 9% of the income tax, depending on the federal state. It is an important source of income for the churches but is individually adjusted to the members' tax burden. Tax programmes such as Lohnsteuer kompakt automatically take the church tax into account when calculating the tax burden.
How much is the church tax?
