Individual assessment
Die Individual assessment is a tax term from German income tax law that describes the separate tax assessment of spouses or civil partners. In contrast to joint assessment, each partner’s income and tax deductions are calculated individually. The individual assessment particularly affects the amount of income tax payable, the applicable tax rate, and the consideration of special expenses and extraordinary burdens.
Legal basis for individual assessment
Legal foundations
Individual assessment is anchored in the Income Tax Act (EStG), particularly in Section 26a EStG. According to Section 26 (1) sentence 1 EStG, spouses or civil partners have the option to choose between joint and individual assessment, provided they did not live permanently apart during the relevant calendar year.
Scope of application
Individual assessment is possible if both spouses or civil partners have unlimited income tax liability and are married or in a civil partnership. Thus, an individual assessment is only possible if the requirements for joint assessment would fundamentally be met. The tax office must consider the individual assessment if at least one of the spouses/partners applies for it.
Process and procedure for individual assessment
Filing the application
Individual assessment is carried out upon application by one or both partners. A joint application by both spouses/partners is not required; an application by one partner suffices (Section 26a (2) EStG). The application can be made by indicating this in the income tax return.
Tax treatment
Each partner submits their own tax return. The taxable income, tax rate, and tax calculation for each partner are carried out independently. Each partner’s own income-related expenses, special expenses, extraordinary burdens, and tax reductions are taken into account based on their gross salary.
Difference compared to joint assessment
Splitting tariff vs. basic tariff
While the so-called splitting tariff applies to joint assessment (Section 32a (5) EStG), the basic tariff is used in individual assessment (Section 32a (1) EStG). The splitting tariff often leads to tax relief, especially if the partners have significantly different incomes. With individual assessment, incomes are taxed separately and individually, which can be an advantage if income levels are similar.
Division of deduction amounts
Special expenses, extraordinary burdens, and tax reductions are generally allocated, according to Section 26a EStG, to the partner who bore the expenses economically. Upon joint application, it is possible in some cases to split amounts equally (e.g., for child allowances, household services, and handyman services).
Legal peculiarities of individual assessment
Loss offsetting
Loss carryforwards and carrybacks are considered separately for each taxpayer in the context of individual assessment. Offsetting losses between partners does not take place.
Tax classes and wage tax deduction
After choosing individual assessment, the individual tax class combinations remain in place (e.g., III/V or IV/IV). However, tax classes are especially relevant for wage tax withholding during the year and may result in additional payments or refunds at the later assessment.
Child allowances and child benefit
Child allowances can be divided in individual assessment according to Section 32 EStG. The division is based on the proportion of maintenance payments or can be made equally at the joint request of the parents.
Effects on church tax and solidarity surcharge
Church tax and the solidarity surcharge are calculated and levied individually under the individual assessment, not according to the spouse-splitting principle.
Practical relevance and common areas of application
Suitable application areas
Individual assessment can be advantageous in the following cases:
- differences in tax burden due to progression effects
- the presence of extraordinary burdens, special expenses, or tax reductions that can be fully attributed to one partner
- planned or completed separations during the year
- targeted tax optimization taking into account individual life situations
Decision guidance
The decision in favor of individual assessment should always be made with regard to the individuals’ income and living circumstances. In many cases, a comparative tax calculation is advisable to determine whether individual or joint assessment is more beneficial.
Historical development
Individual assessment was redefined by the Tax Simplification Act 2011, replacing the prior option of separate assessment. The aim was to simplify and align with European legal requirements. Individual assessment has since been designed to allow partners more control over tax advantages and disadvantages based on their circumstances.
Summary
Individual assessment is a key concept in German income tax law, enabling spouses or civil partners to be assessed separately. It significantly influences the tax treatment of income, the application of tax benefits, and the calculation of tax due amounts. The choice between individual and joint assessment should be made based on a careful analysis of individual circumstances.
See also:
Legal texts:
- § 26, § 26a, and § 32a EStG
Frequently Asked Questions
What legal requirements must be met for individual assessment of spouses or civil partners?
According to Section 26a of the Income Tax Act (EStG), individual assessment of spouses or civil partners is possible if both have unlimited income tax liability, do not live permanently separated, and explicitly apply for individual assessment. The application of one spouse or civil partner is sufficient; the other is then also mandatorily assessed individually. The application may be submitted for the respective assessment year until the assessment notice becomes unappealable and is generally irrevocable; changing to joint assessment for that year is then excluded. It is also worth noting that individual assessment can be chosen anew for each calendar year and does not carry forward automatically. If a separation takes place, or the marriage or partnership is dissolved, or there is no unlimited tax liability, individual assessment is also mandatory.
What are the tax effects of individual assessment compared to joint assessment?
With individual assessment, each spouse or civil partner is assessed only on their own income for income tax purposes. The application of the splitting tariff, which can provide tax relief in joint assessment, does not apply. Instead, the normal basic tariff applies to each individual’s income, which can lead to a higher tax burden, especially if there are significant income differences. Certain tax benefits that spouses/partners are entitled to jointly in a joint assessment (such as the single-parent relief allowance) are considered separately or are allocated differently in individual assessment. Special expenses, extraordinary burdens, and certain tax reductions are generally allocated to the person who incurred the respective expense. A joint deduction is possible only under certain conditions, such as jointly incurred expenses.
How are special expenses, extraordinary burdens, and tax reductions attributed and divided under individual assessment?
According to Section 26a (2) EStG, special expenses, extraordinary burdens, and tax reductions—which could affect both spouses/partners—are attributed to the person who bore them economically. In cases of shared economic liability, a partial allocation is possible; typically determined by actual payment or the economic relationship, for example with jointly concluded insurance policies or joint donations. If both partners pay half the costs, they are also considered for tax purposes at half, unless a different written agreement exists. In certain cases (such as household-related services), allocation may be by headcount, depending on the actual share of the economic burden. For extraordinary burdens, only the reasonable own contribution relevant to the respective party is applied, calculated based on their income and family circumstances.
Are there tax disadvantages with individual assessment, for example regarding the deduction of special expenses or child allowances?
Individual assessment can present disadvantages compared to joint assessment, especially if only one person earns the income or if there is a large income disparity, since the progressive effects of spouse splitting are lost. Deduction of special expenses is, in principle, only possible for the person who actually incurred the expenses. Joint allowances such as the child allowance are generally divided equally between both partners. The entitlement to certain higher allowances (for example for single parents) may also be lost under individual assessment, if the requirements are not met. Tax disadvantages may also arise if certain maximum limits for income-related expenses, special expenses, or extraordinary burdens are not fully utilized because combining the incomes would otherwise allow for a more favorable distribution.
Can losses of one partner be offset against positive income of the other in individual assessment?
In individual assessment, horizontal or vertical loss offsetting between spouses/partners is excluded. Losses incurred by one person as part of their income can only be offset against their own positive income in the individual assessment. There is no right to offset or balance these losses with the partner’s income. A loss carryforward or carryback may also only be offset with the incomes of the affected spouse/partner.
What deadlines must be observed for the individual assessment application?
The application for individual assessment can be submitted up until the finality (legal effect) of the income tax assessment for the relevant calendar year (Section 26 (2) sentence 2 EStG). After this point, a change to another assessment type—such as joint assessment—is legally excluded, unless exceptional reasons or errors in assessment are present. The application must be informal but in writing (also possible via ELSTER) to the responsible tax office and always applies only for the year requested.
Are there special features of individual assessment in the case of spouses or civil partners living permanently apart?
Spouses or civil partners who live permanently apart are mandatorily assessed individually, regardless of whether an application is made. Joint assessment is excluded in these cases under Section 26 (1) EStG. An exception applies if there was no permanent separation during the assessment period, or the marriage/partnership was dissolved during the year; then, joint assessment is still possible for the period of cohabitation, but for the separation period, only individual assessment is permitted. The legal definition of living separately follows the provisions of civil law (Section 1567 BGB).
Can the chosen assessment type be changed afterwards?
The type of assessment determined in the tax assessment notice is generally irrevocable once the notice is formally and materially final. Until finality (unappealability) of the assessment notice, a change in the chosen assessment type is allowed. After finality is reached, such a change is no longer legally possible, unless special reasons such as an obvious procedural error or a faulty application of the law exist. Prerequisite for the change is that both spouses/partners apply for and approve the change on time.
