Germany’s Federal Finance Minister Lars Klingbeil (SPD) has proposed a new tax model intended to replace the long-standing system of joint taxation for married couples according to a government draft cited by Der Spiegel on Thursday. Under the proposal, the current system would be replaced by what the ministry calls “fictitious real splitting.” This approach would allow couples to allocate a specific tax allowance between partners in a way that optimizes their overall tax burden.
In most cases, the lower-earning partner would transfer their allowance to the higher earner. According to the report, the Finance Ministry bases the allowance on the maximum amount that a divorced or separated spouse can currently deduct as alimony payments for tax purposes. This figure currently stands at €13,805. “The real splitting strengthens partnerships without privileging certain lifestyles for tax purposes,” the ministry stated, according to the report.
The reform would also overhaul tax classes, with III and V set to be removed for all couples, ending a system where one partner pays significantly less tax and the other much more.
The changes are expected to have the greatest impact on couples where one partner earns significantly more than the other. The report notes: “The previously particularly large tax advantage in cases of highly unequal incomes would no longer apply.” For couples with similar incomes, however, the proposal would make little to no difference.
The German Economic Institute (IW) modeled the potential effects of the new system. Using a slightly lower assumed allowance than the ministry’s proposal, the institute found that a couple in which one partner earns €100,000 and the other has no income would face an annual tax increase of €4,582 compared to the current system.
“With the values now proposed by the Federal Ministry of Finance, this difference would be somewhat smaller,” said IW tax expert Tobias Hentze, according to Der Spiegel. He added that the gap would be around €4,100 per year. For couples earning €70,000 and €25,000 respectively, the financial impact would be much smaller, with an increase of just under €300 annually.
Germany’s marital splitting system has faced criticism for years, particularly because it can reduce incentives for lower earners to work, most of whom are women. Klingbeil aims to abolish the current system at least for future marriages. The conservative CDU/CSU bloc has traditionally opposed such changes.
However, CDU Federal Family Minister Karin Prien has recently expressed support for reform. Speaking to Table.Briefings, she said: “That the existing tax law affects the attractiveness of additional work by the second earner is completely beyond question.” She added: “These second earners are almost always women.”
Prien emphasized that upcoming reforms should address both the tax splitting system and Germany’s tax class structure. She called on policymakers to create stronger incentives for women to work full-time. According to her, this includes not only tax-related measures but also improvements in childcare infrastructure to support greater workforce participation.
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