Tax advantages through marriage

How to save taxes after the wedding

Did you know that marriage also offers real tax advantages? You can actually save taxes by getting married - and it's very uncomplicated. We clarify all the important questions about taxes in marriage. From the right tax bracket to special tax relief. You'll get practical tips that you can implement immediately and learn not only how to save money, but also how to save your time and nerves!

By the way: Registered civil partnerships are treated in the same way as marriages for tax purposes. All tax benefits apply to everyone who has officially said yes. 

Your most important tax benefits at a glance

In the FAQ you willalso find answers to many other questions about your tax benefits. 

 

Saving with tax class change - how to find the right tax class after marriage

Choosing the appropriate tax bracket after your wedding can give your household more financial flexibility.

What is a tax class?
A tax class is a "tax label", so to speak, that tells the tax office how much of your salary should be withheld for taxes. In Germany, there are six tax classes (I to VI), and each has its own peculiarities.

Why is the tax class important?
The tax class influences how much income tax is deducted directly from your salary. This means that depending on your tax class, you will have more or less net income left at the end of the month. In addition, the tax class can also influence the amount of wage replacement benefits such as unemployment benefit or parental allowance.

What are my options?
As a married couple, there are two main combinations open to you: IV/IV or III/V.

The factor method is a special variant of tax class IV/IV in which the tax office adjusts the tax deduction so that you have to pay less or no tax at the end of the year. It ensures that both partners have approximately the same tax burden, but with an optimized deduction.

Practical example
Assuming you both earn 50,000 euros a year. If you choose tax class IV/IV with factor method, the tax office will adjust the tax deduction so that you have to pay less at the end of the year.

Practical example
Imagine you earn 4,000 euros a month and your partner earns 2,000 euros. If you choose tax class III/V, you could have about 200 euros more in your pocket at the end of the month. That adds up to an extra 2,400 euros a year.

How do I change the tax class?
Changing the tax class is easier than you think. All you have to do is apply to the tax office. This is usually done online and only takes a few minutes.

 

Sharing the Taxes - How Marital Splitting Works

Marital splitting is a tax regulation that applies in Germany to married couples and registered civil partnerships. It allows the joint income of both partners to be added together for tax calculation purposes and then halved.

Why is spousal splitting useful?
Spousal splitting can be particularly advantageous if one of the spouses earns significantly more than the other. In this case, the tax advantage of marriage can be significant. The greater the difference between salaries, the more is gained from it. It equalizes the tax burden between the partners and ensures that you pay less tax overall as a couple.

How does it work?
Let's assume you earn 60,000 euros a year and your spouse 40,000 euros. Together, that makes 100,000 euros. Through spousal splitting, this income is halved to 50,000 euros and then taxes are calculated on it. This tax is then doubled and is usually lower than if each of you would pay taxes separately.

What do you have to do?
To benefit from this tax advantage, you must file a joint tax return. 

How is this related to tax brackets?
Spousal splitting and tax brackets are two different mechanisms, but both aim to optimize the tax burden for married couples. Spousal splitting is usually done once a year when you file your taxes. The tax classes you choose, on the other hand, affect your monthly income. 

Is spousal splitting always worth it?
Spousal splittingis not always worth it and is not the best option for every couple. There are situations where spousal splitting can even be detrimental. Here are some points to consider:

• Similar incomes: If both partners have similar incomes, spousal splitting often brings only minor tax benefits.

• Progressive tax rate: Germany has a progressive tax rate. This means that the more one earns, the higher the tax rate. So if both partners earn a similar amount, the tax advantage from the Ehegattensplitting is often minimal.

• Social benefits: The amount of certain social benefits such as unemployment benefits or parental benefits can be influenced by taxable income. In some cases, spousal splitting can be disadvantageous here.

• Tax class choice: The choice of tax class can influence the monthly net wage. Sometimes it makes more sense to forego spousal splitting and choose a more favorable tax class instead.

• Individual factors: Other individual factors such as children, other income or tax deductions may influence the decision.

However, spousal splitting can be a great way to pay less taxes as a married couple. With a tax return software or through tax advice you will quickly find out whether it is also worthwhile in your case, and how much you can save.

Joint tax return - More money back through teamwork

You can already guess: A joint tax return can bring you financial advantages, not only in the case of spousal splitting. You can often get more taxes back than if you each do the tax return alone.

What changes?
Joint tax assessment allows you to deduct certain expenses more easily. For example, if one of you has high income-related expenses or special expenses, the other will also benefit.

What is assessment?
Assessment is a technical term from tax law. It is about how the tax office considers your income for tax purposes. In a joint assessment, the income of both partners is combined and considered as one unit, which can bring tax advantages.

A practical example
Let's say one of you is studying and has high costs for books and travel expenses, while the other earns full income. By filing a joint tax return, you can deduct these expenses and thus reduce your tax burden.

 

More tax benefits through allowances - how married couples profit

Tax allowances are set amounts of money that you can earn each year without having to pay taxes on them. When you get married, these tax benefits double for you and your partner. 

What exactly aretax allowances?
A tax allowance is a certain amount that is tax-free. This means that you do not have to pay any taxes to the tax office up to this amount. In Germany, for example, there is a basic tax-free amount of 10,908 euros for 2023. Up to this amount, your income is tax-free.

How do married couples take advantage of this tax benefit?
As a married couple, you can claim the tax-free allowances for both partners. This means that the basic tax-free amount of 10,908 euros applies to each of you, which together makes 21,816 euros. If one of you earns less or has no income at all, the unused allowance of one partner can be transferred to the other.

A practical example
Let's assume you earn 50,000 euros a year and your spouse currently has no income because he or she is on parental leave. By getting married, you can both use the basic tax-free allowance of 10,908 euros, which adds up to 21,816 euros. This means that the first 21,816 euros of your income are tax-free!

 

Cheaper insurance - More protection for less money

Insurance is an important building block for financial security. Spouses can often profit doubly here: through better conditions and lower premiums.

What changes in insurance policies?
Some insurance providers offer special rates for married couples. This applies, for example, to liability, household and car insurance. By bundling policies, you can often benefit from discounts.

A practical example
Imagine you both have a car. If you insure these two vehicles on a joint car insurance policy, you can often get a "partner discount." This can significantly lower your annual insurance costs.

 

More freedom with gifts and inheritance - Further tax advantages

The period after the wedding is also the best time for very expensive gifts. Indeed, getting married is also very worthwhile for gifts and inheritances.

Gifts between spouses: What changes?
When you get married, you can give each other gifts of up to 500,000 euros without incurring taxes. By comparison, unmarried couples can give each other "only" 20,000 euros tax-free. So thanks to a wedding, you can transfer larger assets to each other tax-free.

Inheritance after marriage
If one of you should die, the other can inherit up to 500,000 euros without having to pay taxes. Also, if you have a joint house and the surviving partner continues to live in it, he does not have to pay inheritance tax on it. If you are not married, you can only inherit up to 20,000 euros tax-free. And the joint house? The surviving partner has no automatic right to it, unless it is written in the will.

A practical example
Suppose you want to make a gift of a large sum of money or real estate to your spouse. Marriage allows you to make this gift tax-free up to an amount of 500,000 euros. This is just an enormous advantage compared to the 20,000 euros that apply to non-married couples.

 

Investments - Invest and save taxes

When the opportunity is there, investing is always smart. But as a married couple, you can still make the whole thing tax-optimized.

What will change with regard to investments?
If you are married, you can split capital gains in such a way that you pay less final withholding tax overall. (The term "final withholding tax" refers to the tax on profits from interest and shares). This is especially useful if one of you has a lower tax rate.

A practical example
Suppose one of you has a high income and the other has a lower income. If the partner with the lower income holds the investments, there will be less tax on the investment income.

Double saver's allowance through marriage

As a married couple, you can also keep more of your investment income, thanks to the double saver's allowance.

What will change?
Normally, everyone has a saver's lump sum of 1,000 euros per year (from 2023). This is the amount you can earn in interest, dividends or other investment income without paying taxes on it. If you are married, you can double this amount and earn 2,000 euros tax-free together.

A practical example
Imagine you both have a savings account and receive interest on it. Normally, each of you would have to pay taxes on interest income over 1,000 euros. But because you are married, you can earn up to 2,000 euros in interest tax-free. 

 

Two apartments - double address, double benefits

Sometimes it makes sense to have two apartments, for example because of work or other obligations. Here, too, you can save taxes.

What changes?
With two apartments, you can often deduct the costs of the second home from your taxes. This is especially true if one of you needs a second home for work reasons.

A practical example
Let's say one of you works in another city during the week. You can declare the rent and travel expenses for this second home on your tax return and thus reduce your tax burden.

Pro tip: Get married just before the end of the year and save taxes retroactively!

That's right! In Germany, there is a special rule that allows you to change tax brackets retroactively for the entire year if you get married before December 31. This means that you and your partner can take advantage of the tax benefits of marriage for the entire year, even if you didn't say "I do" until December.

How does this work?
Imagine you get married on December 30. You can then immediately apply to the IRS for a tax bracket change and claim the more favorable tax bracket retroactively for the entire year. This can result in a substantial tax refund when you file your tax return for the year.

Why is this so beneficial?
This tip is particularly useful for couples where one earns significantly more than the other. By switching to a more favorable tax bracket, you can receive a substantial tax refund. Best of all, you can claim this refund for the entire year, not just for the period after the wedding.

Is there a catch?
There isn't really much of a catch, but it is important to apply for a tax bracket change as soon as possible after the wedding to take full advantage of the benefits. Also, you should note that this rule only applies to marriages that took place in Germany and to people who are liable to pay taxes in Germany.

Frequently asked questions

How do children affect the financial benefits of marriage?
Children are not only a joy, but also bring tax benefits. For example, you can claim child benefit or use child allowances. This can significantly reduce your tax burden.

Are there special rules for retired couples?
Yes, you can also benefit from tax advantages as a retired couple. For example, you can divide your pension income so that you pay less tax. A tax advisor can help you get the most out of it.

What happens to the financial benefits in the event of separation or divorce?
A number of things change in the event of separation or divorce. For example, spousal splitting no longer applies. The tax bracket also often changes. It is important to find out early so as not to experience any disadvantages.

What documents do I need to take advantage of the various benefits?
That depends on the benefit in question. For example, for a change in tax class, you need an application to the tax office. For insurance benefits, the marriage certificate is often enough.

What about international marriages and German tax laws?
International marriages can be complicated, but basically German tax laws apply if one of you is liable for tax in Germany. However, there are also double taxation treaties with many countries.

Do I have to follow certain deadlines to get the benefits?
Yes, some benefits have deadlines. For example, the application for a change of tax class often has to be submitted by November 30 of the previous year.

What should self-employed people in marriage consider for tax purposes?
As a self-employed person in marriage, there are many ways to save taxes, for example by choosing the right legal form or through spousal splitting. A tax advisor can give you special tips.

Can I retroactively claim benefits that I have already missed?
Yes, you can claim some benefits retroactively. For example, you can file a tax return up to four years in arrears.

Are wedding expenses tax deductible?
Unfortunately, wedding expenses are generally not tax deductible. But hey, marriage comes with many other financial benefits!

How do alimony payments affect your financial situation?
Alimony payments can be tax deductible. This is true for both the one paying and the one receiving. But the rules are complicated, so it's good to get advice.

What rules apply to registered domestic partnerships compared to marriage?
Registered domestic partnerships are treated the same as marriages for tax purposes. That means you can take advantage of the same benefits, from tax brackets to allowances.