Married couples waiting for a child have the chance to get much more money of parental allowance, the so-called Elterngeld, if they are able to be ahead and change in time their tax class (Steuerklasse). The tax bracket influences in fact the net salary, on the basis of which the calculation of the parental allowance is made.
An example: an employee with a gross salary of monthly 3000 euro receives a net income of around 1477 euro if he/she belongs to the fifth tax class. The parental allowance will amount then to 906 euro per month. If the same employee changes in time to the third tax class, he/she will receive a net salary of 2105 euro per month and the Elterngeld will therefore amount to 1.314 euro per month: this means that more than 400 euro per month will be gained, for a total of around 4900 euro more for the entire parental leave, much more!
The change of one’s fiscal position is actually legal in Germany since 2009.
The only precondition is the speed of action: you should change your tax class as soon as you are aware of the pregnancy, since the Elterngeld is calculated on the basis of the 12 months prior to the birth of the child.
How to change your tax class:
If you are not ware to which fiscal category you actually belong, you just have to look at your monthly paychecks. In order to change tax class you have to go to the Finanzamt of your neighborhood and fill a form. Here a link to the form: https://www.steuerklassen.com/steuerklasse-wechseln/antrag-auf-steuerklassenwechsel/
How to choose the tax class:
Married couples are given two options:
- Both in the fourth class
- One partner in the third class and the other in the fifth.
Once married the Finanzamt will automatically insert both partners in the fourth tax class.
This solution is actually correct is both partner have a similar income. If instead the incomes are different, the partner with a salary amounting to more than 60% of the overall income of the couple should change to the third class, and the other to the fifth class.
The third-fifth class split is in normal conditions the best solution for a better overall net income of a couple with a substantial different salary but not when you are going to have a child, above all if the wife in the fifth class and the couple decides, as it usually happens, that the mother will take the most of the parental allowance. Since the Elterngeld is calculated on an average of the 12 months net salary before the birth of the child, in this case the mother would be financially penalised.
To right this wrong an employed mother should change as soon as possible her tax class to the third. This holds instead untrue for mothers who do not work, because they will in any case be entitled to the fixed sum of 300 euros per month, and the same is for freelancers (see below).
The change of class from a fifth to a third could seem non advantageous during the working period, because more taxes will be applied and the overall net income of the couple will decrease, but it is very important to know that you will receive that amount back after your tax declaration and, by dong so, you will be entitled to a definitely better parental allowance.
Good to know: once the parental leave period has expired, you can just simply go back to your former tax class.
To get an actual advantage you should nonetheless change your tax class as soon as possible, considering also that the practice of change of class will take around a month and also considering that 6 weeks before the foreseen pregnancy the mother-to-be is entitled to the maternal leave (Mutterschutz) and the calculation about the Elterngeld will exclude this period.
If the majority of the monthly salaries are in the new class (i.e. minimum 7 months) the Elterngeld office (Elterngeldstelle) will consider the entire calculation on the basis of the last fiscal position. If instead the majority is in the old class the change would have been in vain, because the calculation will consider the former fiscal class.
You should then try to reach at least 6 months in the new class before entering the Maternal leave.
What if it is too late?
The only possible solution in this case would be to waive the maternal allowance (Mutterschutz) or part of it in order to reach the 7 months in the new class.
For example, if the maternal leave starts in the middle or last part of month (say the 20th), it could be useful to renounce to those 10-15 days because the Elterngeldstelle calculates on a basis of full months (this means that even waiving 1 day could be useful).
To waive the maternal allowance you have to communicate it to your employer with a letter, where you write down the period you are waiving and give a reason for it.
If you do not want to go on working during that delicate period, you could use the vacation days you still are entitled to for the rest of the year. Of course you have to explain this to your employer as well and reassure him/her that he/she will not suffer any financial loss anyway.
But be careful: this solution makes sense only if you make the right calculations.
In case it is the father who is in the fifth class and asks for the majority of the parental allowance, of course the same rules apply but reversed, with the advantage of the lack of maternal leave, which means that for him will be calculated the full 12 months before the birth of the child.
If you decide to take an even share of Elterngeld, you should make a calculation. Here a link to do it (in German): https://www.elternzeit.de/elterngeld/elterngeldrechner/’
A special case: if you marry during the 12 months before the birth of the child:
If you have married during the 12 months time before the foreseen birth of your child (which are the ones calculated for the parental allowance) you have the unique opportunity to ask for a retroactive tax class change back to the date of the marriage (Rückwirkung ab dem Monat der Heirat). To do that you should select the number 20 in the form for the change of class this is the only case where a retroactive change is legally allowed in Germany.
For parents with a freelance work
The change in tax class for freelancers does not give any advantage, because the Elterngeldstelle calculates the paternal allowance for freelancer on the basis of a monthly average of the tax declaration of the year before. So, if the child is born in October 2020, they will take into consideration anyway the tax declaration of 2019, making thus absolutely impossible to change tax class in time.
Be Careful: this rule applies also if you have a mixed job, partly employed and partly freelance. In this case only the tax declaration of the former year will be evaluated , even if you worked as a freelance for just one euro!
If you need a consultation to decide how to organise your parental leave in the most efficient way you can contact us at email@example.com and ask us about costs and information.