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
- Calculate the expected due date and count back 7 months — that's your deadline.
- Agree with your partner on who gets tax class III and who gets V. The parent receiving Elterngeld should get III.
- Apply for the switch at your local tax office. Both partners must sign. The switch takes effect the following month.
- Plan ahead: The partner in class V will have less net income monthly. However, the difference is balanced through the tax return.