How does a change in tax class affect my tax return?
January 5, 2022 | 40,00 EUR | answered by Friedhelm Peters
Dear tax advisor,
my name is Christian Voigt and I have a question regarding a possible change in tax class and its impact on my tax return. Currently, I am in tax class IV and so is my spouse. We are both working and earn roughly the same amount. However, as we are expecting a baby in the near future, we are considering whether it would be beneficial to change our tax class in order to take advantage of tax benefits.
Our concern is that changing tax classes could have negative consequences on our tax return. We are wondering if we might be able to utilize fewer tax benefits or if we might even have to make a tax payment. We want to ensure that we create the best possible tax situation for ourselves and avoid any financial disadvantages from changing tax classes.
Could you please explain to us how a change in tax class would affect our tax return and whether it might be beneficial to switch tax classes to take advantage of tax benefits? Are there different options that we should consider, and what are the advantages and disadvantages of each? We would appreciate your professional advice and support in making this decision.
Thank you in advance for your help.
Sincerely,
Christian Voigt
Dear Mr. Voigt,
Thank you for your question regarding a possible change in tax class and its effects on your tax return. A change in tax class can indeed lead to tax advantages in certain situations, especially when income circumstances change, as is the case for you, since you are expecting a child.
As a married couple, you have the option to choose between different tax class combinations. Currently, you are both in tax class IV, which means that you both earn roughly the same amount and the tax burden is divided accordingly. However, switching to a different tax class can affect the amount of income tax.
One option for you as a married couple with a child is for one of you to switch to tax class III, while the other switches to tax class V. This would result in the person in tax class III paying less income tax, while the partner in tax class V would pay more income tax. This can overall lead to a lower tax burden, as the tax class combination III/V can result in a higher relief amount.
It is important to note, however, that a change in tax class does not automatically lead to a tax refund. In some cases, it may even result in a tax bill, especially if too little income tax was withheld during the year. Therefore, it is advisable to make a precise calculation in advance to estimate the tax implications of a change in tax class.
There are other tax class combinations you could consider, such as the tax class combination IV/IV with factor. This tax class combination takes into account individual income circumstances more precisely and can lead to a fairer distribution of the tax burden.
Ultimately, the choice of tax class combination depends on various factors, such as the income difference between spouses, possible deductions or allowances. It may therefore be beneficial to seek advice from a tax advisor to determine the optimal tax class combination for you.
I hope this information helps you in your decision-making process. If you have any further questions or require a detailed calculation, please do not hesitate to contact me.
Yours sincerely,
Friedhelm Peters
