Tax classes 1-6 explained: explanation, allowances, benefits& disadvantages 2022

 Tax classes 1-6 explained: explanation, allowances, benefits& disadvantages 2022

A brief overview of the different income tax classes 1 to 6 – advantages, annual allowances and application for tax class change at a glance.

 Tax classes 1-6 explained: explanation, allowances, benefits& disadvantages 2022

Tax classes 1 to 6 explained This is how the income tax classes differ in 2022

 Tax classes 1-6 explained: explanation, allowances, benefits& disadvantages 2022

 Tax classes 1-6 explained: explanation, allowances, benefits& disadvantages 2022

Dusseldorf Every employee pays income tax in Germany. The amount of income tax depends on the tax class to which the person is assigned by the tax office. Which wage tax class you are finally assigned to is decided by various factors.

Especially for the annual tax return, a change to a different income tax bracket or a different combination of two brackets can bring financial advantages. But only very few people know the income tax brackets in Germany in detail. The net salary of each employee is also influenced by the respective tax class – how this works out for your income can be easily calculated with our gross-net calculator 2022.

But how are the wage tax classes defined?? Is it possible to switch between classes and which income tax class is best for whom in which situation?? We have summarized the most important information on the advantages and disadvantages of tax classes 1 to 6 in 2022 in an overview.

This is how the tax classes I to VI differ in 2022

Why are there different tax classes in Germany??

Employers in Germany are obliged to withhold wage tax from the employee’s gross earnings and pay it to the tax office. The assignment of employees to tax classes is intended to make this process easier for the employer, since the different income and tax allowances as well as the lump sums regulated in the tax law are already taken into account in the wage tax advance payment in the wage tax classes.

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In order to be placed in a tax bracket in Germany, the taxpayer must have unlimited income tax liability. According to the Income Tax Act, this applies to all natural persons who have a domicile or habitual residence in Germany – in other words, who are registered in Germany and live here.

What tax classes are there in Germany?

In Germany, there are a total of six different tax classes. These are aimed at different working groups of people and are mainly defined by the marital status of the respective person. Married couples and registered partnerships, for example, fall into a different tax bracket than singles or widows.

Who assigns me to a tax class?

The tax office assigns a tax class to each employee, taking into account the marital status of each person. Accordingly, childless singles are grouped in a different income tax bracket than a married couple with children.

How do I find out my tax class??

It is easy to find out your personal tax class. The easiest way is to look at the Payroll. The income tax bracket is on every pay stub an employee receives from their employer.

Which tax class will bring which advantages in 2022??

Each of the six tax classes is suitable for different life circumstances. Tax classes 3 and 5, for example, can only be used by married couples and registered civil partners filing a joint tax return. But you can also use both tax class 4. The more exact execution follows further down.

Basically, the personal marital status is a decisive factor for the classification in a tax class.

Why do the tax brackets have allowances?

The annual allowance is intended to provide the basis for taxing employees according to their personal and family situation – this is what the legislator intends. Allowances are an additional means of obtaining tax relief for special expenses, such as raising children or caring for dependents.

The annual tax-free allowance is made up of the different tax-free allowances for the individual income tax classes. These in turn can differ from tax class to tax class. A calculation or a comparison of these allowances can therefore be worthwhile.

What allowances take into account the tax brackets in 2022?

The individual allowances of the tax classes in Germany bring tax advantages. This is how the individual allowances are defined:

  • Basic allowance: This amount makes part of an employee’s income tax-free. 9.984 Euro will be used to secure livelihood in 2022.
  • Employee lump sum/advertising expenses lump sum: This is an amount that is deducted as a lump sum from the income when determining the income – unless higher income-related expenses are proven. This is based on § 9a no. 1 EStG. The abbreviation "Pausch" stands here as an abbreviation for "lump sum". A lump sum of 1000 euros is deducted for income-related expenses. The home office allowance is offset together with the income-related expenses allowance.
  • Special expenses lump sum/social expenses lump sum: Certain costs are considered special expenses. This includes contributions to statutory and private pension plans, contributions to health and long-term care insurance, education costs, church tax, and donations or membership dues. If no special expenses are noted in the tax return for 2021, the tax office automatically takes the special expenses lump sum into account. This amounts to 36 euros per year for singles and 72 euros for married people.
  • Preventive care lump sum/preventive care lump sum: This amount is taken into account when calculating the income tax and exempts the taxpayer’s social security expenses from tax. If wages have been received, a lump sum is deducted as an allowance for pension expenses. This depends on the respective gross income and in § 39b paragraph 2 number 3 EStG precisely regulated.
  • single parent relief amount: The contribution serves to relieve the tax burden of a single-parent taxpayer. The single-parent relief amount can be deducted from the total income in a calendar year, provided that the household includes at least one child for whom the person is entitled to a child allowance or child benefit. The single-parent relief amount has been increased significantly due to the Corona pandemic in Germany. This increase will remain permanently at 4008 euros as of 2022.
  • Child allowance: This is an allowance that provides a certain tax-free amount of money when parents are taxed. It serves as tax relief for expenses that parents have to pay for their children. In 2021, the child allowance has increased to 5460 euros. It is also valid for 2022.
  • Allowance for care or training needs of the children: 1464 Euro (both parents together 2928 Euro)

Tax class 1 at a glance – advantages and allowances 2022

Tax bracket 1 is for singles or taxpayers who are no longer married. Accordingly, this class is intended for persons who single, unmarried, divorced or widowed are.

Persons in this income tax bracket cannot change to any tax bracket. For example, tax classes 3 or 4 are exclusively for married couples or registered partnerships, respectively.

Single persons with children, but who do not live in their own household, are also assigned to tax class 1. If the child lives permanently in the household, the single person is assigned to tax class 2.

The respective tax deductions to be made in tax class 1 are calculated depending on the taxpayer’s respective salary level. Unless an employee works in a mini-job and does not exceed the limit of 450 euros per month. In the case of a 450 euro job, the income remains untaxed anyway. The classification in a tax class is therefore meaningless.

Thus, no tax deductions are claimed. From a salary of 451 euros per month, the employee must, in addition to wage tax, also pay social security contributions such as nursing care insurance, health insurance, unemployment insurance or pension insurance.

Persons who are assigned to tax class 1 and have children receive the full child allowance and the allowance for care and education needs. The two allowances are offset together in the income tax.

Tax class 1 allowances in 2022

  • Basic allowance: 9984 Euro
  • Employee lump sum (also known as lump sum for income-related expenses): 1000 Euro
  • Special expenses lump sum: 36 euros
  • Pension lump sum: Oriented to the gross wage
  • Children’s allowance: 2730 Euro (both parents together 5460 Euro)
  • Allowance for care or training needs of children: 1464 Euro (both parents together 2928 Euro)

Amounts exceeding the tax allowances of tax class 1 must be taxed.

Tax class 2 at a glance – advantages and allowances 2022

Tax class 2 is aimed at single parents, Single persons, Widowed or Divorced persons with children. Persons in this tax bracket are entitled to tax relief – i.e. pay less tax. The reason for this is the so-called single-parent relief amount, or relief contribution for short. Prerequisite is that the child lives in his or her own household and no other adult shares the household. The relief amounts to 4008 euros. For each following child 240 Euro are recognized as deductible relief amount. With the increase of this amount by 2100 Euro the special burden of single parents due to the COVID-19 pandemic was taken into account. The increase is permanent from the year 2022.

The allowance is not to be confused with the Child allowance of 5460 euros, i.e. 2730 euros per parent. In addition Allowance for care and education or training needs of the children in the amount of 2928 Euro, i.e. 1464 Euro for each parent. The two allowances are combined in the income tax.

At the same time, tax class 2 offers the most allowances of all income tax classes. In addition to the basic tax-free allowance or the employee lump sum, employees benefit here as mentioned from the single-parent relief amount, which is provided exclusively in wage tax class 2.

Tax allowances of tax class 2 in 2022

  • Basic tax allowance: 9984 Euro
  • Employee lump sum: 1000 euros
  • Social expenses lump sum: 36 euros
  • Precautionary lump sum: depending on gross income
  • Child allowance: 2730 euros (both parents together 5460 euros)
  • Allowance for care or training needs of children: 1464 Euro (both parents together 2928 Euro)
  • Single parent relief amount (relief amount): 4008 Euro for the first child, additional 240 Euro for each further child

Amounts exceeding the tax allowances of tax class 2 must be taxed.

Tax class 3 at a glance – advantages and allowances 2022

Tax class 3 is only for Married or. in a registered civil partnership living Single earner or Double earners possible, where one of the two partners has applied for tax class 5. It is the tax class with the lowest tax rate, but also without allowances. The idea of this combination is based on a single-earner model, where one person generates the main income for the spouse and also family.

The single earner is assigned tax class 3 and can apply exclusively in this combination with income tax class 5 for the low earner.

The consequence: Since there is no basic tax-free amount of 9984 Euro in tax class 5, this amount is added twice to the income in tax class 3. This means that the salary of the low earner is taxed significantly more than that of the sole earner. The low income is hardly "worth it.

Incorrectly, this model is often recommended as a fair model for spouses with the indication that it is more favorable from a tax point of view. However, a look at the breakdown of tax class 4/4 shows that this is a persistent rumor.

In fact, married couples do not pay less taxes with the choice of tax class. The tax liability is only distributed differently.

Tax class 3 allowances in 2022

  • Basic tax-free amount: 19.968 Euro
  • Employee lump-sum allowance: 1000 Euro
  • Social expenses allowance: 36 Euro
  • Pension lump sum: dependent on gross earnings
  • Child allowance: 5460 Euro
  • Allowance for care or training needs of the children: 2928 euros

Amounts exceeding the tax allowance of tax class 3 have to be taxed.

Tax class 4 at a glance – advantages and allowances 2022

Tax class 4 is aimed at Married/registered civil partnership living Double earners. In contrast to the combination of 3 and 5, the partners only pay as much tax as their income over the course of the year.

This means that even with different incomes, for example in the case of a part-time job, there is still more net from the gross.

In the case of widely differing incomes, it may also be worthwhile to apply for the factor procedure. This must be done every two years at the tax office. Then the previous wages are checked to see how high the share of actual income was and will be in the future – i.e. who contributed how much to the joint income. The result must be declared to the employer.

The tax burden is then adjusted. This ultimately ensures fairer taxation in the sense of an equal partnership.

The change to tax class 4 can, unlike the change to 3/5, also be applied for by the spouses individually.

Tax class 4 allowances in 2022

  • Basic allowance: 19.968 euros (9.984 Euro per partner)
  • Employee lump sum: 1000 Euro
  • Social expenditure lump sum: 36 euros
  • Pension lump sum: dependent on gross earnings
  • Children’s tax allowance: 2730 euros
  • Allowance for care or education needs of children: 2928 Euro

Tax class 5 at a glance – advantages and allowances 2022

Only Married or registered civil partners can choose tax class 5. This income tax class acts as a kind of counterpart to tax class 3 and can only be applied for and used in combination with the latter. The person with the lower income chooses tax class 5.

The combination of tax class 3 and 5 ensures that the income in tax class 3 is taxed less. In contrast to tax classes 1, 2, 3 and 4, there is no basic allowance and no child allowance in income tax class 5. This is awarded exclusively to the person who belongs to tax class 3.

Tax class 5 allowances in 2022

  • Employee allowance: 1000 Euro
  • Social expenses allowance: 36 Euro
  • Pension allowance: Calculated on the basis of gross earnings

Amounts exceeding the tax allowances of tax class 5 must be taxed.

Tax class 6 at a glance – advantages and allowances 2022

Tax class 6 is aimed at people with an additional wage tax card for another employment relationship. In principle, the highest tax burden is in tax class 6, since neither the child allowance nor the employee lump sum or the basic allowance can be claimed. The high deductions and few annual allowances are justified by the second employment relationship, since the person earns more in principle as a result.

If an employee has a second job or marginal employment in addition to his or her main job, he or she is no longer placed in only one tax class, but also has tax class 6 in addition to his or her previous income tax class.

Before starting a second job with tax class 6, it makes sense to calculate whether this second job is financially worthwhile. In tax class 6 it does not matter whether you are married or have children. Because here no annual allowances can be taken into account. This means that income tax class 6 differs fundamentally from tax classes 1 to 5.

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