Wage Tax Classes or Income Tax Classes in Germany

§ What are tax classes in Germany?

A tax class is a designation indicating the category of payroll taxpayer to which an employed individual belongs.

Payroll tax is deducted from the salary of every employee in Germany, and other deductions are made from the salary. The amount of this tax that will be assessed and withheld from the salary depends on the tax class of the employee.

In Germany, there are a total of 6 primary tax classes, and which one will be assigned to a specific worker depends on their marital status, employment relationships, and some other criteria. A special tax class that exempts foreign workers from paying income tax is the zero tax class.

Tax classes are assigned to employees by the local tax office.

Every employee working in Germany is assigned a tax class. Income tax classes (German: Steuerklassen, Lohnsteuerklassen) are categories of taxpayers. Depending on the assigned category, the amount of income tax deducted from the salary is determined. There are a total of 6 main tax classes in Germany, and one class for foreign workers.

§ List of Tax Classes in Germany

Below is a list of tax classes in Germany:

• «0» - Foreign workers;
• «I» - Individuals not married and without children;
• «II» - Single parents;
• «III» - Married couples, life partner with significant income differences;
• «IV» - Married couples, life partner with minor income differences;
• «V» - Married couples, life partner with significant income differences;
• «VI» - When having multiple jobs.

§ Description of Wage Tax Classes 0, 1, 2, 3, 4, 5, and 6

Tax Class 0

This is a special class assigned to foreign workers who live in another country but work in Germany (Grenzgänger). This class is introduced to avoid double taxation in Germany and the country of residence. It exempts the worker from income tax. To be assigned this class, a certificate must be obtained from the tax office.

Tax Class 1

Employees who are not married and do not have children, for example, singles, divorced, long-separated individuals, or widowed.

Tax Class 2

This tax class is for single parents or guardians who raise a child alone. It is applied when at least one child lives with the taxpayer in their household. This child or children must be entitled to the child allowance (Kinderfreibetrag) or to receive child benefit (Kindergeld). Additionally, no other adult in this household may reside who could act as a legal guardian.

Combined Tax Class 3

Tax Class 3 is applicable only for one of the spouses (Ehegatten, Lebenspartner) living together. The mandatory condition is that the second spouse has Tax Class 5.

Class 3 - lower tax burden, Class 5 - higher tax burden.

This combination of tax classes is advantageous when one spouse earns significantly more than the other and thus, having Class 3, pays less tax on the higher salary.

Tax Class 4, with factor and without factor (Faktor)

Applies only to spouses (Ehegatten, Lebenspartner) living together. The mandatory condition is that both spouses have Tax Class 4.

The factor or coefficient used with Tax Class 4 is "Ehegattensplitting," a method of taxing the incomes of spouses in which their joint income is considered. Both spouses must use the selected Class 4 with or without the factor.

Combined Tax Class 5

Tax Class 5 is applied only for one of the spouses (Ehegatten, Lebenspartner) living together. The mandatory condition is that the second spouse has Tax Class 3.

Class 5 - higher tax burden, usually applied to the spouse earning less than the other spouse.

Tax Class 6

Applied when an employee has multiple jobs simultaneously, regardless of their marital status. Typically used for additional part-time work.

§ How to Choose the Tax Class?

The tax class is assigned to the employee in accordance with their family situation and type of employment relationship. It is not possible to arbitrarily choose an income tax class. An exception is made for tax classes 3, 4, 5 - spouses can choose the combination that is most advantageous for them.

The combination of classes 4 / 4 is usually used for spouses whose salaries are roughly equal. The combination 3 / 5 is used by couples with a significant salary difference.

§ How to Change the Income Tax Class?

If there is a need to change the tax class, an application must be submitted to the local tax office. The application can be filled out manually on a form or submitted electronically on the website of German taxpayers (ELSTER, link below on the page).

§ Tax Classes for Minijob

In the case of a minijob, usually, no application of a tax class is required, as this work is subject to a flat tax rate. Learn more: What is a Minijob and how much tax and contributions does someone pay who has a minijob.

Tax classes in Germany