Federal Finance Minister Lars Klingbeil (SPD) plans to abolish the marital tax classes III and V, which are commonly used by married couples. According to a paper from the Federal Ministry of Finance-cited by the newspaper “Handelsblatt”-future taxation will be managed automatically based on the income distribution between partners. This document details various tax simplifications that are currently being negotiated between the federal government and the states.
The paper proposes that tax classes III and V be integrated into an “automated factor procedure,” which is described as a “modernization of wage tax deduction for married employees.” This new system is intended to reduce the number of mandatory tax assessments for employed married individuals, thereby easing the burden on taxpayers and tax offices.
This proposal is politically sensitive because it was not part of the governing coalition agreement. When the traffic light coalition and then-Finance Minister Christian Lindner (FDP) presented a similar bill in the summer of 2024, the Union party strongly criticized it. It is expected that this opposition will now extend to Klingbeil’s plan, particularly since the SPD Finance Minister recently mentioned the potential elimination of the marital spousal split.
The states governed by the Union have reportedly already expressed concerns. The Ministry of Finance acknowledged this in the paper, noting that the “measure is politically decided.” The Federal Ministry of Finance intends to incorporate this proposal into the draft bill regarding tax simplifications. These measures are grouped under the general term “Autumn Package” and aim to be passed as early as this year.
Currently, married couples and life partners can choose whether both of them are categorized under tax class IV (factor procedure), or if one-the partner with the higher income-uses tax class III and the other uses tax class V. In tax class III, the monthly tax deductions are lower than in class V. The Ministry of Finance justifies the potential reform with a “spirit of justice.” This is because women often earn less in many families, typically due to working part-time roles, and class V results in higher monthly deductions for them.
