Why Germany’s tax system could be putting women off marriage

Coinciding with World Marriage Day on Sunday, Germany’s Statistics Office (Destatis) released figures showing that only 349,200 couples married in 2024 – the lowest number recorded since 1950.

Today, only around half of adults in Germany are married, compared with 60 per cent in the mid‑1990s, and some researchers argue that one factor influencing this trend – particularly for women – is the country's tax system.

So how exactly does the system affect women when they marry – and how can couples make informed decisions about taxes, fairness and financial planning in their relationships?

Tax and marriage

Recently, a major study by the ifo Institute and the University of Oslo (“The Marriage Earnings Gap”) found that women’s gross income in Germany dropped by an average of 20 percent after marriage, regardless of whether they had children. Men’s incomes, by contrast, remained unchanged.

According to the study, about a quarter of this drop comes from (dis)incentives created by Germany’s system of joint taxation for married couples.

The key factor here is Germany’s system of spousal splitting (Ehegattensplitting), which treats a couple’s combined income as if each partner earned exactly half.

To illustrate how this plays out, imagine a couple where one partner earns €70,000 a year and the other €28,000. Before marriage, each is taxed individually. After marriage, both partners are effectively taxed as if they earned €49,000. This reduces the total tax bill for the household – but it also means the higher earner keeps far more of their pay than they would if they were single, and the lower earner keeps less.

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In the overwhelming majority of cases, the lower earner in a heterosexual relationship in Germany remains the woman.

Critics such as Marcel Fratzscher of the German Institute for Economic Research (DIW Berlin) have called this a system that creates “strong negative incentives” for married women to work at all, or to work more hours, because their contributions are taxed significantly more heavily than they would be if they had remained unmarried.

What are the arguments in favour of spousal splitting?

Despite this criticism, the current system has its supporters. For example, fiscal economist Stefan Homburg warns that without splitting, a single‑earner married couple could end up paying more tax than an unmarried couple with the same income.

Supporters also argue that splitting allows one parent to spend more time raising children because it lowers the tax bill most when one partner works little or not at all.

What options do married couples have when it comes to taxes?

Spousal splitting applies automatically after marriage, but couples still have a few choices that influence how their income is taxed over the course of the year and how much each partner takes home each month.

The first option is to actively request separate assessments, where each partner is taxed individually as if they were unmarried. But under the current rules, this generally means that married couples will end up paying more tax. 

The second option is to remain jointly assessed but to opt for a different combination of tax classes. Germany offers three options for married couples, known as III/V, IV/IV, and IV/IV with a factor.

Under III/V, the higher‑earning partner is placed in the more favourable Class III, which significantly boosts their monthly take‑home pay because very little tax is withheld from their income.

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The lower‑earning partner is placed in Class V, where the withholding rate is much higher. This arrangement can make the household feel better off overall, because the couple has more money coming in month by month.

In addition, many couples opt for III/V simply because payroll offices routinely recommend it when one partner earns significantly more than the other – despite the fact that it can drastically reduce the lower earner’s own monthly income.

By contrast, the IV/IV combination – with or without a factor – spreads the tax burden more evenly between both partners and avoids the severe reduction in net pay that many lower‑earners experience under Class V.

Regardless of which option a married couple chooses, their combined annual tax bill at the end of the year will remain exactly the same.