Germany could replace III/V with automatic factor withholding. This would change each partner’s payroll deductions. Using EUR 60,000 and EUR 30,000 gross, we show how different monthly net pay can coexist with the same joint annual tax.
Switching from III/V to IV/IV with factor changes payroll withholding. With the same income, deductions and assessment, final joint annual income tax stays the same. The amount reaching each person’s bank account every month can still matter to a household.
Since 10 November, reports have renewed the debate about abolishing German tax classes III and V. A broader reform of joint tax splitting is also being discussed. These proposals affect different parts of the calculation. The joint tax calculator with tax class comparison therefore separates monthly payroll net from the annual outcome.
What Klingbeil proposed in November 2026
According to Deutschlandfunk’s report on 10 November, the commonly combined classes III and V would be replaced with automatic factor withholding in class IV. Reporting refers to an internal finance ministry paper. Handelsblatt first reported the proposal.
As of 12 November 2026, this is a political proposal. The available reports do not establish a binding start date. They do not create an automatic change to your next payslip. IV/IV with factor is already available on application under section 39f EStG.
The ministry links the proposal to distributing withholding more closely in line with both partners’ earnings and simplifying tax returns. Any removal of filing obligations would depend on the legislation. Under today’s section 46(2), number 3a EStG, couples with two employment incomes generally face mandatory assessment under both III/V and IV with factor.
Why a tax class changes monthly net pay
Employers withhold wage tax as an advance payment towards income tax. III/V distributes those payments unevenly: the class III earner initially has lower deductions and the class V earner higher ones. The annual assessment determines what the couple ultimately owes together.
The factor method divides expected joint income tax by the sum of each partner’s expected class IV wage tax. This factor is then applied to payroll withholding, bringing the splitting benefit into the year’s deductions. IV/IV without factor is a separate option and does not produce the same calculation.
With unequal earnings, switching may increase the former class V earner’s net pay and reduce the former class III earner’s. Total ongoing household pay can change too. At an unchanged final annual tax, a higher advance payment means a different later reconciliation.
Example: EUR 60,000 and EUR 30,000 annual gross
This example uses the Obolus calculation engine for 2026: a married couple, two children under 25, Bavaria, statutory health insurance with a 2.29% supplementary contribution, no church tax, other income or individual deductions. Partner 1 uses class III in the III/V comparison. The calculated factor is 0.957.
Monthly amounts equal annual amounts divided by twelve. They exclude child benefit and do not represent an exact payslip for a particular month. Each table row is rounded independently, so rounding differences can occur.
| Person | III/V | IV/IV with factor |
|---|---|---|
| Partner 1: EUR 60,000 gross | €3,553.42 | €3,202.66 |
| Partner 2: EUR 30,000 gross | €1,507.38 | €1,798.75 |
| Household total | €5,060.79 | €5,001.41 |
Partner 2 receives approximately EUR 291 more per month with the factor method; partner 1 receives approximately EUR 351 less. The household receives approximately EUR 59 less during the year. This difference comes from advance tax payments.
The separate annual calculation gives joint tax including the solidarity surcharge of EUR 11,450 under both options. After annual reconciliation and including child benefit of EUR 259 per child per month, both leave EUR 66,230.50 in annual household net income. In this example, changing tax classes alters who receives the money and when.
Compare III/V and IV/IV with factor using your incomes
The second debate concerns joint tax splitting itself
Under joint splitting, the couple’s combined taxable income is halved, the tax tariff is applied and the resulting tax is doubled. Changing this method can change joint annual tax. Factor withholding instead manages payroll deductions within the existing annual taxation system.
The German Council of Economic Experts’ 2026/27 annual report, presented on 11 November, also lists abolishing joint tax splitting among possible measures to increase labour supply. The specific family benefits in our reform scenario come from a separate proposal.
A group of economists published an open letter on 2 June 2026, proposing capped real splitting and higher family benefits. Maximilian Blömer and Andreas Peichl at ifo produced the simulations. The reform concept proposes transfers between spouses of up to EUR 13,805, monthly child benefit of EUR 316 and a child allowance of EUR 11,902 including care, education and training allowances.
Obolus simulates this package alongside the tax class comparison. A capped transfer is deducted from the higher taxable income and added to the lower one. Higher family benefits belong to that hypothetical reform. Its outcome can therefore differ from current joint splitting on an annual basis too.
EUR 316 child benefit belongs to the reform scenario
The calculator uses EUR 259 per child per month for 2026. The economists’ EUR 316 figure is a model assumption in the capped real splitting package. The separate government draft for income tax reform in 2027, BT-Drs. 21/8235, proposes EUR 267 from January 2027. That planned increase is excluded from this 2026 example.
The tax assessment compares child benefit entitlement with the tax relief provided by child allowances. A reform comparison should therefore consider family benefits together with tax. Annual household net in the calculator includes child benefit once; reported annual tax is not reduced by the cash payment.
Which question to examine for your own planning
III/V versus IV/IV with factor addresses the distribution of monthly pay. The effects of capping joint splitting depend on annual household income including family benefits. The calculator keeps these outcomes separate and also offers individual taxation as a comparison.
This example covers a simplified employee profile. Other income, personal deductions and changes during the year can alter reconciliation. Effects on income replacement benefits such as parental allowance are excluded. A payroll net comparison alone is therefore insufficient for a decision ahead of a birth or an income change.
Open your own tax class and capped real splitting comparison. Calculation notes and assumptions are available alongside the calculator.