Why Your Tax Class Affects Elterngeld
Elterngeld is based on the so-called Elterngeld-Netto, not your actual net income. The Elterngeld-Netto is calculated using flat-rate deductions, where income tax is determined based on the parent's tax class. A more favorable tax class leads to lower flat-rate tax deductions and thus a higher Elterngeld-Netto — and more Elterngeld.
The Tax Class Strategy
Married couples can choose between the combinations III/V and IV/IV. If the parent who will receive Elterngeld switches to tax class III, their Elterngeld-Netto increases significantly. The other partner receives tax class V with higher monthly deductions — but this is balanced through the annual tax return.
Calculation Example
Mother earns €3,500 gross, father earns €4,500 gross. The mother plans 12 months of Elterngeld. In tax class IV: Mother's Elterngeld-Netto approx. €2,380, Elterngeld approx. €1,547/month. In tax class III: Mother's Elterngeld-Netto approx. €2,800, Elterngeld approx. €1,800/month (maximum). Savings: approx. €253 more Elterngeld per month, over 12 months approx. €3,036 more.
The 7-Month Rule
Important: The tax class switch must be effective at least 7 months before birth. The Elterngeld office checks which tax class was in effect for the longest period during the 12 months before birth. A switch in the 6th month before birth would no longer be considered.
Step-by-Step Guide
1. Calculate the expected due date and count back 7 months — that's your deadline.
2. Agree with your partner on who gets tax class III and who gets V. The parent receiving Elterngeld should get III.
3. Apply for the switch at your local tax office. Both partners must sign. The switch takes effect the following month.
4. Plan ahead: The partner in class V will have less net income monthly. However, the difference is balanced through the tax return.