Klingbeil plans to scrap tax classes III and V for married couples

What the finance ministry wants

Finance Minister Lars Klingbeil (SPD) plans to abolish tax classes III and V, which many married couples currently use, according to a report by Handelsblatt that cites an internal paper from the Federal Finance Ministry. Under the proposal, wage tax would be levied automatically in line with how income is divided between the two spouses, using what the paper calls the automated factor procedure. The ministry says the goal is to simplify tax returns, because many jointly assessed couples would no longer have to file one. According to the ministry, the total income tax a couple pays together would not change. The plan is reportedly being negotiated between the federal government and the German states.

How the current system works

Spouses and registered life partners can now choose between two options: both are placed in tax class IV, the so-called factor procedure, or the higher earner uses class III while the lower earner uses class V. Class III carries smaller monthly deductions at first, but the couple does not pay less tax overall, so the burden is simply split differently between the partners. Handelsblatt notes that the basic tax-free allowance currently stands at 12,348 euros, and the class III partner benefits from both allowances, 24,696 euros in total. The III/V combination assumes that the class III partner contributes roughly 60 percent of joint income and the class V partner about 40 percent. When incomes diverge further, the class III partner may pay too little tax during the year, which is why such couples must file a return and may owe a back payment. Benefits calculated from monthly salary, such as parental allowance, could also be affected, and the couple may face a liquidity shortfall during the year.

Basic tax-free allowance12,348

Class III partner, both allowances combined24,696

Basic tax-free allowance

12348 euros

Class III partner, both allowances combined

24696 euros

Data from the article text

Arguments for and against

The ministry justifies the proposal in its paper by pointing to fairness. In many families women earn less, for example because they more often work part-time, and in class V they then face higher monthly deductions, which reduces their take-home pay and weakens the incentive to work more. Daniela Karbe-Geßler of the Bund der Steuerzahler put the underlying mechanics plainly.

“The wage tax is only an advance payment on the annual income tax.”

Critics point to earlier attempts. Christian Lindner (FDP), then federal finance minister, presented a comparable draft bill in summer 2024, which the Union criticised sharply and which was never implemented. WirtschaftsWoche reports that the previous coalition of SPD, Greens and FDP had included the idea in its coalition agreement and approved it in cabinet, though the Union opposed it then. Handelsblatt reports that the reform is not provided for in the current coalition agreement, and Union-governed states have already expressed concerns. Readers of the Focus online forum were mostly critical, suspecting that the state wants more revenue, although some pointed out that the annual tax would stay the same.

Timeline and next steps

Klingbeil had already floated a similar move in April, and the CDU/CSU parliamentary group has so far been skeptical of such a reform. According to Der Tagesspiegel, the ministry intends to add the proposal to its draft law on tax simplification, which is grouped under the label Herbstpaket, or autumn package. Handelsblatt reports that the measures are to be adopted, if possible, still this year.

The ministry's own paper states that the measure will be decided politically, so whether the proposal succeeds remains open.