When and why does an employee’s tax class (Steuerklasse) change in Germany?

In Germany, an employee’s tax class (Steuerklasse) determines how much income tax is withheld from their gross salary. This classification can change due to personal life events, changes in household status, or adjustments initiated by the employee.

As an Employer of Record (EOR), Horizons ensures these changes are reflected accurately and in compliance with German tax regulations. This article outlines the most common reasons a tax class might change, what actions the employee needs to take, and how Horizons supports the process.

What Is the Steuerklasse?

Germany uses a system of six tax classes to determine income tax withholding:

Class I: Single, divorced, widowed (no children)
Class II: Single parent
Class III: Married, spouse in Class V or no income
Class IV: Married, both earning similar incomes
Class IV with Factor: Married, more accurate withholding based on actual income ratio
Class V: Married, spouse in Class III
Class VI: Secondary or multiple jobs

Employees are initially placed in a tax class based on their personal situation, but this class can change throughout their employment.

When and Why Does a Tax Class Change?

1. Marriage

Why: After getting married, an employee becomes eligible for a new set of tax class options (e.g., IV/IV or III/V), which may result in more favorable tax withholding based on household income distribution.
When: The change typically takes effect in the month following the marriage.

What the employee must do:

Ensure the marriage is registered at the Standesamt (civil registry).
The tax office (Finanzamt) is updated automatically.
If the employee wants to switch from the default IV/IV to III/V or IV with Factor, they must file a change request with the Finanzamt (either in writing or via ELSTER).

2. Divorce or Separation

Why: If a married couple separates or divorces, they are no longer eligible for classes III/V or IV/IV.
When: The change typically takes effect at the beginning of the following year after the separation or upon official divorce.

What the employee must do:

Notify the Finanzamt of the change in marital status.
Affected employees are usually moved to Class I or Class II (if they have children and are single parents).

3. Birth of a Child (Single Parents)

Why: Single parents may qualify for Tax Class II, which includes additional tax benefits.
When: After the child is born and the employee meets the eligibility criteria.

What the employee must do:

Register the child’s birth with local authorities.
Apply for Class II through the Finanzamt, providing proof of custody and household status.

4. Multiple Jobs

Why: If an employee takes on a second job, that income is automatically assigned to Tax Class VI, which carries the highest withholding rate.
When: As soon as the second employment begins.

What the employee must do:

Inform both employers about the employment situation.
No further action is typically required; the ELStAM system will reflect the new status.

5. Annual Income Disparity in Marriage

Why: Married couples may want to optimize their tax burden by adjusting to III/V or IV with Factor based on actual income ratios.
When: Changes can be made once per year, typically before the end of the calendar year.

What the employee must do:

Submit a request for a tax class change to the Finanzamt.
Use the “Antrag auf Steuerklassenwechsel bei Ehegatten” form or ELSTER.

What Does the Employer (or EOR) Need to Do?

As an EOR provider, Horizons handles tax class changes automatically by retrieving employee data through the ELStAM system (Elektronische Lohnsteuerabzugsmerkmale). Once an update is recorded by the tax authorities, our payroll systems:

Automatically apply the correct tax class
Adjust income tax withholding accordingly
Ensure ongoing compliance with German tax law

No direct action is required from the employer unless specifically requested by the tax authorities.

Horizons ensures seamless handling of tax class changes by monitoring updates from ELStAM and adjusting payroll in line with legal changes.