Navigating Individual Taxation for Married Couples
Spousal tax filing options: When filing separately offers potential benefits for married couples
Countdown's on! The deadline for submitting the 2024 tax return is rushed past us already, on July 31, 2025, for many taxpayers. Married couples, beware, before you hastily submit that joint tax return; double-check if it's the best choice for you. Consumer advice portal Finanztip points out that in certain cases, individual assessments can knock significant euros off your tax bill.
Generally, joint assessments are favorable for tax purposes, but not always! Here are a few factors to consider, especially if one or more of these apply:
- Parental allowances
- Severance pays
- Incurred losses
- Short-time work allowances
- High healthcare costs
- Foreign incomes
- Two top earners
- Different faiths (special church tax)
Tax Tech to the Rescue
Crucial to note, the tax office won't automatically check which assessment is more advantageous for you. They'll go with the default, which is joint assessment, even if you don't tick the box on the main tax return form for joint assessment. Couples who fancy individual assessments need to explicitly tick that box.
The sanest course of action? Tax software! Couples can utilize various programs to calculate whether individual or joint assessment is better suited. Finanztip suggests it's the easiest way.
Deadline's looming, yet on average, taxpayers who file a return receive €1,172 back, says the Federal Statistical Office.
Insights:
When deciding between filing joint or individual tax returns, consider income disparities and tax class combinations.
Income Differences Between Spouses:- Large income disparities favor joint filings, reducing overall tax burden due to progressive taxation.- Similar incomes typically don't benefit from joint filings, making individual assessments more suitable.
Tax Class Combinations:- The choice of tax class combinations (Steuerklassen) influences monthly tax withholdings and affects the final tax return calculation.- Opting for tax class IV when both spouses have similar incomes is ideal.- The higher earner opting for tax class III with the other using tax class V benefits couples with significant income differences.- Tax class IV with a factor aims to balance tax burdens.
Requirement to File a Tax Return:- Regardless of tax class choices, filing a tax return is recommended, but mandatory when certain tax class combinations are selected or when joint filing is chosen.
Additional Considerations:- Couples qualifying for joint assessment must live together at least one day in the tax year.- Both partners must be fully taxable in Germany for joint assessment benefits.- Complex cases can be navigated with tax software such as SteuerGo, Wundertax, or WISO Steuer or a tax adviser's help, but it may cost between €600 and €2000.
Summary:- Joint filing with income splitting typically benefits couples with uneven incomes by lowering tax liabilities.- Individual filing or certain tax class combinations may be more suitable for spouses with similar earnings.- Optimal filing method requires considering income levels, tax class options, and eligibility criteria.- Professional advice or tax software can help in making the best decision while adhering to German tax law.
- Given the varying factors that influence personal-finance issues, it's essential for married couples to consider their income differences and tax class combinations when deciding between joint or individual tax returns.
- For couples with uneven incomes, joint filing with income splitting will often lower tax liabilities, making it beneficial, while spouses with similar earnings might find individual assessments more suitable.
