Tax classes in Germany

Updated:
05.10.2026

Everyone working in Germany has a tax class (Lohnsteuerklasse). Why are tax classes needed? No matter which tax class you have, you can claim back overpaid tax through a tax return. Does the tax class therefore have no effect on anything? First I will explain why that is indeed the case. But later I will show in which cases the tax class is important after all.

Disclaimer: The article is provided for informational purposes only and does not constitute tax advice or a recommendation. We recommend contacting accredited tax advisors in Germany.

Those who prefer listening rather than reading can watch this video on the same topic

Income tax

The underlying subject to which tax classes belong is income tax (Einkommensteuer). I recommend a more detailed article on this topic – read. Here we will only briefly reiterate the most important points.

To calculate income tax, it is necessary to:

Compile all income for the year (Einkünfte)
Apply permitted deductions (Abzüge)
The result is taxable income (zu versteuerndes Einkommen)
Apply the tax formula from the relevant law to it — either the standard one or the one for families (spouse splitting).

Wage tax (Lohnsteuer)

The procedure described above applies when filing a tax return in the year following the tax year. Unfortunately, the government wants to receive payments from us not the following year, but right at the moment when we earn the income. They can be considered advance payments towards future income tax.

When it comes to salary, such advance payments are called “payroll tax” (Lohnsteuer). I put the name in quotation marks because it is not a separate tax, but simply an advance payment towards income tax.

Whatever the advance payments are, a recalculation (Einkommensteuerveranlagung) is made when submitting the tax return. If you have paid more in advance than the assessed tax, the difference will be refunded to you. If less, you will be asked to pay the balance.

How do you calculate the size of the tax on a salary? Basically, the same way income tax is calculated. But difficulties arise because a number of parameters that are important for the tax are still unknown. First and foremost, in the case of married couples, the total family income and the ratio of income between the partners. And this is important for the correct application of income splitting for married couples (Ehegattensplitting). And this is where the concept of tax classes comes in.

Tax classes

Let us define it as follows: A tax class is a predefined set of parameters (configuration) for a more accurate estimation of income tax advance payments. If that sounds complicated, we will break it down with examples now.

The law establishes 6 tax classes.

Class selection
Main job					Secondary employment (Nebenjob)
Single people		Married couples (Choice: 3-5, 4-4, 5-3 – total 8)			VI
I	II (Lone parent)	III	IV (with and without factor)	V

Tax class overview

Class VI

Designed for those with secondary employment. At their main job, a person has their primary tax class, while at the second job, they have tax class VI, which includes no allowances.

Classes I, II

Classes I and II are intended for single people.

Class I is the basic class.

Class II is for single parents, and it includes a special tax deduction for single parents (Entlastungsbetrag für Alleinerziehende).

Classes III, IV, V

These classes are intended for married couples. Only married couples are free to choose their classes. However, they must choose so that the sum of the classes equals 8 (i.e. III-V, IV-IV or V-III). Furthermore, if both spouses earn a salary, the III-V combination (like IV with a factor) makes submitting a tax return compulsory (for recalculation).

Class IV works the same way as Class I. Child tax deductions are split in half.

Class III is more advantageous—it pools all allowances, such as the double basic tax-free allowance (Grundfreibetrag) and all child allowances (Kinderfreibetrag).

Class IV with coefficient

Since 2010, there has been an additional option to take the difference in spouses’ incomes into account even more precisely: the factor (Faktor).

The expected total amount of income tax for the spouses is calculated under two scenarios—using marriage splitting and not using it—and then the first amount is divided by the second. This is the coefficient. It expresses the degree of tax saving for the given income distribution. The lower the coefficient, the greater the saving.

If the spouses’ incomes are equal, the coefficient turns out to be 1.000, which means there is no saving.

When calculating the tax on salary in this case, the tax is first calculated as for standard tax class IV, and then the result is multiplied by the coefficient. If the calculated monthly tax was €1,000 and the coefficient is 0.800, then €800 tax is withheld.

Let us consider the example of a family with incomes of 50’000 and 20,000 euros. The tax calculated separately will amount (in 2026) to 12,118 euros, and with income splitting for married couples it comes to 11,340 euros, which gives us a coefficient of 0.935.

			Together
Expected annual income	€50,000	20,000 euros	70,000 euros
Standard tax	10,548 euros	1,570 euros	€12,118
Tax (splitting)	11,340 euros
Factor	11340 EUR / 12118 = 0,935
Tax with factor	9,871 euros	1,469 euros	11,340 euros

Example of calculation of the coefficient for tax class IV

The calculation uses an estimate of the annual income of each spouse.

How to choose a tax class?

You have already realised that only spouses can choose, everything else is regulated.

And even for them, however they choose, the tax can be recalculated by submitting a tax return. So what is the point of choosing a tax class?

The only point is to make the advance payment as close as possible to the actual tax amount. If you pay too much every month, you will get the money back, but until then you are giving an interest-free loan to the tax office. (And they won’t let you pay too little anyway.)

You can use this simple scheme:

Are the spouses’ salaries roughly the same? Take IV-IV
One of the spouses has no salary at all or has a significantly smaller one? Take III-V (naturally, III should belong to the higher earner)
In other cases, take IV-IV with the coefficient.

How do I change my tax class?

Today this is done via Elster—the same system that is used for submitting tax returns. There is an application there for changing tax parameters—Lohnsteuerabzugsmerkmale (ELStAM).

Elster — Antrag auf Lohnsteuer-Ermäßigung und zu den Lohnsteuerabzugsmerkmalen (application for wage tax reduction and wage tax deduction characteristics).

There you will find a form through which you can make all the necessary changes. Apart from the tax class, there you can also specify the number of children and other parameters. Your denomination for church tax is not changed this way: it comes from the Meldebehörde (registration office) data. The employer will receive your data automatically.

Historical curiosity: previously, there used to be a paper tax card where the tax office entered all the parameters, and you handed this card in to your employer.

When the tax class is important

I tried to show that the tax class is not such an important thing. But there is a case when it is more important.

You negotiate your salary with your employer as a Brutto (gross) amount. After wage tax and social security contributions are deducted, you are paid your Netto (net) salary.

It turns out that a number of benefits (so-called Lohnersatzleistungen) depend on your net salary. For example:

Unemployment benefit (ALG1) — 60/67% of Netto
Partial unemployment (Kurzarbeitergeld) – 60/67% of Netto
Parental allowance (Elterngeld) – 65% of Netto
Mutterschaftsgeld (maternity pay)
Unterhalt (maintenance)
Krankengeld

The Netto figure taken into account may be the latest one or that for a recent period.

And now it is clear that the tax class directly affects the net salary. By changing tax classes, you can influence your net pay. For example, when planning a child, you can increase the net income of the spouse who will be claiming parental allowance. This may be suboptimal in terms of the amount of tax. However, you will get the overpaid tax back through your tax return, and the allowances will not be recalculated retroactively.

This is somewhat of a grey area, so in important cases consult a specialist.

Conclusion

I hope that everything is clear now regarding tax classes. I recommend a YouTube playlist with videos on income tax and the tax return. Subscribe, so you don’t miss new ones.