Tax Guide for Indian Couples — Split Tax Class in Germany

Why this scenario is different

When both spouses are tax-resident in Germany (and only then), Zusammenveranlagung is available. Tax class III/V puts the higher earner on III (low withholding, full Grundfreibetrag) and the lower earner on V (high withholding); IV/IV balances both. The Steuererklärung at year-end resolves the same tax bill either way — but III/V improves cash flow during the year for unbalanced earners.

Key considerations

• Spouse must be in Germany or EU/EEA for Zusammenveranlagung (§ 26 EStG) — spouse in India = Einzelveranlagung only
• III/V suits unbalanced incomes (e.g. €70k + €25k); IV/IV suits balanced incomes
• Steuerklasse I is correct when spouse is abroad — German tax software sometimes wrongly flags this
• Tax class change requires both spouses' signatures at the Finanzamt — process via Antrag auf Steuerklassenwechsel
• Mid-year arrival of spouse: § 26 Abs. 1 EStG lets you elect joint filing for the FULL year if spouse is resident on 31 Dec

Refund-maximising tactics

• Run both scenarios in TaxDost and pick the better one — same tax owed, better cash flow with right class
• If spouse arrives mid-year, elect joint filing for the full year and claim Ehegattensplitting
• Children's allowance (Kinderfreibetrag) maximised under joint filing
• If one spouse is abroad: Einzelveranlagung + Unterhaltszahlungen deduction (up to €11,784/parent) for support sent to family in India