What are the advantages and disadvantages of tax class IV compared to other tax classes?
May 21, 2023 | 40,00 EUR | answered by Friedhelm Peters
Dear tax consultant,
My name is Uwe Büchner and I am looking for information on the different tax brackets. Currently, I am in tax bracket IV and I am wondering if this is the best choice for me. I am married, have two children, and my wife is currently not working. We both have similar incomes and would like to know the advantages and disadvantages of tax bracket IV compared to other tax brackets.
I am aware that tax bracket IV is recommended for married couples with similar incomes, as both spouses can use the same tax allowances. However, I wonder if in our case it might be more beneficial to choose a different tax bracket in order to obtain tax advantages.
My concern is that we might be giving away money by staying in tax bracket IV, if there are other tax brackets that would be financially more advantageous for us. I want to ensure that we have the best possible tax situation for our family and therefore, it would be very helpful if you could explain to me the advantages and disadvantages of tax bracket IV compared to other tax brackets.
Thank you in advance for your support and I look forward to your expertise.
Sincerely,
Uwe Büchner
Dear Uwe Büchner,
Thank you for your inquiry regarding the different tax classes and whether tax class IV is the best choice for you. It is good that you are thinking about this and want to ensure that you have the best possible tax situation for your family.
Tax class IV is indeed intended for married couples with similar income, as both spouses can benefit from the same tax allowances. This means that the taxable income of both spouses is combined and taxed accordingly. In many cases, this can be financially advantageous as the tax burden is evenly distributed between both partners.
One advantage of tax class IV is that both spouses benefit from the splitting tariff and therefore pay less taxes overall compared to other tax classes. Additionally, in your case, it may be beneficial that your wife is not employed, as you as the sole earner may have additional tax advantages.
However, there are also disadvantages to tax class IV that you should consider. It may be that through joint assessment in tax class IV, you may have less tax benefits than if you were to choose other tax classes. For example, if one partner earns significantly more than the other, it may be more beneficial to choose tax classes III and V to optimize the tax burden.
I recommend that you seek personal advice from a tax advisor to analyze your individual situation and determine the best tax class for you and your family. A tax advisor can show you exactly which tax class combination is most advantageous for you and provide tips on how to achieve tax savings.
I hope this information is helpful to you and I am available if you have any further questions.
Best regards,
Friedhelm Peters
