Spousal splitting: Will the concept finally be abolished?

Connection, family planning, security, tradition – there are many good reasons for marriage. But taxes are also a reason. Because a wedding is often not only accompanied by a common surname, but also a joint tax return. Married couples can often save significant taxes by filing jointly. This is due to spousal splitting.

Unmarried parents, patchwork families and single parents find this unfair. There has been debate about reform for decades. Latest reason: The traffic light government’s plans to abolish tax classes 3 and 5. Bavaria’s Finance Minister Albert Füracker (CSU) calls the project an “ideology-driven paternalism.” It could be an attempt to abolish the tax-advantageous splitting tariff.

Splitting promotes single-earner marriages

The principle of splitting between spouses is simple: no matter how much the spouses actually earn, the tax office taxes them as if each had received exactly half of their joint income. In contrast to individual assessment, this can result in a much lower tax rate and therefore a lower tax burden. Splitting is particularly advantageous when one person earns significantly more than the other. For example, in families in which one works full-time and the other part-time or stays at home and earns nothing, for example because of the children. If partners earn almost the same amount, marriage makes little difference from a tax perspective.

If married people choose the tax class combination 3/5, they can benefit from spousal splitting during the current year when deducting monthly income tax. This option takes the splitting tariff into account across the board: the partner in class 3, usually the higher earner, has particularly few tax deductions from their wages. The other party in class 5 bears the main tax burden. Now the combination will no longer apply in the future. Affected couples should be transferred to the factor method of tax class 4, which takes the actual income distribution into account and thus distributes the tax burden more fairly.

Splitting debate reveals profound conflict

Large differences in income enable large tax advantages – many see spousal splitting and tax class combination 3/5 as a symbol of a traditional marriage model with a main earner. While some want to overcome it, others want to preserve it. In their argument, both sides refer to Article 6 of the Basic Law. Accordingly, marriage and family are under special protection.

But a third of all children today are born outside of marital unions; their parents have no splitting advantage. Conversely, more than half of married couples have no children and benefit from tax benefits. Things looked different when spousal splitting was introduced in 1958. The housewife marriage was a common model in post-war Germany.

The dispute over spousal splitting reveals a deeper conflict: What is family today and who does the state want to support? The opinions are divided.

Spousal splitting losers

In the past, the OECD and the EU Commission have repeatedly criticized Germany for spousal splitting. It supports families with only one worker and prevents less earning spouses from increasing their working hours.

One thing is clear: the losers of spousal splitting are predominantly women. After all, significantly more women than men work part-time. For working women with children the figure is 66 percent. The proportion has hardly changed over the past ten years. Particularly in combination with tax- and social security-free mini-jobs as well as a lack of childcare options, the split tariff keeps women in a traditional distribution of roles, according to criticism. You are not only threatened with tax disadvantages, but also financial losses in the event of a separation or in old age.

Single parents and parents without a marriage certificate are completely excluded from spousal splitting. They now make up a third of all families in Germany.

Reform overdue

For many women, unmarried parents, patchwork families and single parents, a reform of spousal splitting is long overdue. Converting the 3/5 tax class combination into the 4/4 factoring method can only be a start. Modern reforms that are intended to promote justice and gender equality should also include sufficient education and child care options or place a greater focus on families instead of marriages. Alternative models such as family splitting are being discussed.

Nevertheless: For now, the federal government is only planning to abolish the 3/5 tax class combination. “Spousal splitting should not and must not be touched,” said Federal Finance Minister Christian Lindner (FDP) last summer. The possibility of joint assessment and marital tax saving will therefore continue to exist.