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Introduction to Germany’s Tax Reform Proposal
Germany’s Federal Minister of Finance, Lars Klingbeil, has announced plans to abolish the traditional Ehegattensplitting system for newly married couples. The proposal, detailed in ministerial documents, introduces a new tax arrangement called “fiktives Realsplitting” (fictional real splitting) as a replacement. This change aims to modernize the taxation of couples to better reflect contemporary social and workforce realities while removing incentives that discourage dual full-time employment [Source 3].
Details of the Fiktives Realsplitting Model
The proposed fiktives Realsplitting model allows partners to allocate a defined tax allowance so that their combined tax burden is optimized. The allowance amount is based on the maximum deductible support payments similar to those allowed for divorced or permanently separated spouses, currently 13,805 euros. This system primarily impacts couples with highly unequal incomes, reducing the tax advantage seen under the current scheme. For example, a couple with one partner earning 100,000 euros and the other with no income would see a tax increase of approximately 4,100 euros annually under the new model, compared to the existing Ehegattensplitting benefits. For couples with incomes of 70,000 euros and 25,000 euros respectively, the tax difference is more modest, at roughly 300 euros per year [Source 2] [Source 6] [Source 1].
Implications for Existing and New Couples
While the reform targets couples entering marriage in the future, current marriages will retain the Ehegattensplitting system to prevent disruption. Alongside this change, the Finance Ministry plans to eliminate the tax class combinations III and V, simplifying the taxation procedure, particularly in the payroll system. The reform is designed to address the so-called “part-time trap” where one partner, often women, reduce working hours due to the tax disadvantage under the current splitting. The Ministry emphasizes that this measure is one of several steps needed to promote equal participation in the labour market [Source 3] [Source 7].
What Expats and Foreign Workers Need to Know
For expats, international students, and foreign workers residing in Germany who plan to marry, the planned end of Ehegattensplitting means their joint taxation will follow new, more restrictive rules regarding income splitting. Couples with uneven incomes should prepare for higher tax liabilities. Those already married can continue to benefit from the existing splitting system, but any changes in marital status or new marriages will be subject to the new rules. Furthermore, the planned abolition of tax class III/V combinations may affect payroll tax deductions, requiring couples to reassess their tax class choices for accuracy and tax efficiency. Expats should monitor official announcements to understand deadlines and adjust tax declarations accordingly [Source 3] [Source 7].
Overall, the reform aims to better align the tax system with modern family structures and labour market goals rather than allowing preferential tax treatment for traditional single-earner households. Expats and foreign residents should consult with tax advisors to understand how these changes impact their personal financial planning.
For further details, see the original announcement: Tagesschau report on Ehegattensplitting replacement [Source 3].
