How to Change Your Tax Class: Possibilities During the COVID-19 Pandemic

Many taxpayers have faced financial losses during the COVID-19 pandemic. The reason: short-time work (“Kurzarbeit”) or an imminent job loss. From a tax point of view, it is possible to reduce the monthly losses and improve the net wage. Any guesses how? By changing your tax class or “Steuerklasse”. This article shows you how.
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Changing Your Tax Class - the Facts at a Glance.

  • The amount of income tax depends on the current tax bracket and your marital status.
  • If you are likely to lose your job or slip into Kurzarbeit, it is worth checking the tax class and changing it, if necessary.
  • The tax class can be changed several times a year.

What does tax class depend on?

As an employee, you will receive your tax class from the tax office. This depends on your marital status. Singles, single-parents, and married couples are classified differently. Anyone who is married or lives in a registered civil partnership can change the tax class.

So if you’re married or partnered, changing your tax-class during the pandemic might appeal to you.

As a rule, both partners automatically receive tax class 4 after the wedding.

For singles, this corresponds roughly to tax class 1. In this case, couples can change their tax class. This can be useful because the tax bracket determines your net wages at the end of the month.

Bear this in mind: From a tax point of view, it doesn’t matter which tax class you choose as a couple. Taxes are calculated exactly with the income tax return. So it doesn’t depend on the income tax class. After the income tax return, the tax office creates a tax assessment. Following this, there are two possibilities. As a taxpayer, you may receive a refund if you have paid more income tax than necessary. Or, the tax office demands an additional payment. The tax brackets, therefore, simply determine the net wages at the end of the month.

What are the options if the spouse is on Kurzarbeit?

If you are in Kurzarbeit, it can be beneficial to change your tax bracket. If you are the main breadwinner in the partnership, it is ideal for switching to tax bracket 3.

This does not always apply and has to be calculated in each case. This is because one spouse changing to an advantageous tax class automatically means a disadvantageous tax class for the other.

Example: The breadwinner changes from tax class 3 to 5 because the spouse faces Kurzarbeit. This lowers the net wage of the breadwinner.

Whether the change is worthwhile or not, in this case, depends on the amount of the short-time work allowance (“Kurzarbeitgeld”) of the partner with lower earnings. As a couple, you need to work out whether there will be more net wages left in the account after the change.

The tax class can be changed several times a year.

So far, it has been possible to change tax brackets once a year. A second change was permitted only in exceptional cases. However, now changes in tax class are permitted several times a year. So you can adjust the tax bracket depending on living conditions in the COVID-19 pandemic.

Example: The job is on the brink of disappearing. Unemployment benefits will be drawn.

The tax bracket also has an impact on the amount of unemployment benefit entitled to the person. In tax class 3, these benefits are often higher. The tax class entered at the beginning of the respective year is always the one taken into account.

If you predict being unemployed at the start of the new year, it may be worthwhile to change the tax class before January 1st.

Jana Teuber
by Jana Teuber
published on: 18.08.2022
updated on: 18.08.2022

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