What is the singles tax?

Ah…love! Not only does it feel great to find your perfect match, it’s also good for something else: your wallet. When it comes to living expenses, moving in with a significant other means cutting your costs in half. And if you’re married, you’re looking at some pretty hefty tax savings. 

Don’t get us wrong, being single has loads of perks! You get to be a free agent, prioritize what matters to you, and explore the world on your own terms. But still, all that independence can come with a cost: the “singles tax.” Here, we’ll dive into what the singles tax is, why it’s so taxing, and how you can combat it with our handy savings tips. 

Today, more and more people are living alone. According to Statista, in 1991 there were around 11.3 million single households in Germany. As of 2022, that’s risen to almost 17 million — making up the majority of households. Even if those living in single households aren’t technically single, they still pay their entire rent themselves. What’s more, those living in small apartments pay a particularly high price, since smaller living spaces usually cost more per square meter. Then there are all the additional costs: electricity, water, gas — each of which is cheaper when split two ways. In another study, a single person in a 50-square-meter flat who uses 5,00 kWh of gas paid €572 per year, while a couple with the same living space paid €956 per year — cutting their individual payments to €478.

If one partner in a couple has household insurance, the other partner doesn’t need to pay for a duplicate policy. The same goes for internet, or even a Spotify or Netflix account. Then there’s the German TV and radio tax, which is calculated per household and not per person. When it comes to groceries, couples, families, and even roommates can save money by cooking together, while singles end up paying more per kilo on food. Anyone with their own car needs to pay all the costs themselves. To top it all off, even leisure activities can cost more — for example, singles often need to get a double room in a hotel, paying nearly the same price as a couple would for the same room. All this is to say: There’s a financial cost to being single.

The term “singles tax” refers to the increased financial burden that people face when they don’t split their living costs with anyone else. It’s a symbolic tax, not a real one, and the amount varies depending on where you live. In New York, for example, high rents mean that singles end up spending around $7,000 more per year, while in England it’s roughly £860 per person. Although there isn’t an exact figure, an OECD study puts Germany near the top of the list, thanks to the comparatively high tax burden — but more on that later! 

The singles tax has short- and long-term implications. With inflation, rising rents, and the current energy crisis in Europe, it’s becoming harder to finance a solo apartment. Many people are moving in with roommates or even getting a second job to manage the financial burden. And when you zoom out, building wealth as a single person becomes more difficult as well. From financing an emergency fund to putting money into your pension, setting money aside is a challenge when you’re shouldering your living costs by yourself.

So, how does being single affect you when it comes to taxes? Before we get into this, let’s clarify some terms. 

The word “single” is used casually to describe someone who isn’t in a romantic relationship. However, when it comes to taxes, it refers to your marital status. The way German law sees things, it makes no difference whether you’re dating someone or not: Single folks and people who are partnered but unmarried all file under Tax Class 1. Provided you’re working, you can only change your tax class if you get married (Tax Classes 3-5), are a single parent (Tax Class 2), or have several jobs that are subject to social security contributions (Tax Class 6). 

In Germany, those who file in Tax Class 1 bear the highest tax burden, comparatively speaking. Single parents (Tax Class 2) can benefit from exemptions that amount to €4,008, as well as an additional €240 for each child per year. These savings are critical for parents raising children in an increasingly expensive world. And yet, the taxable income threshold is around €1,600 for single parents, but singles pay taxes on their income as soon as it’s more than €910 per month. 

The difference is even stronger when comparing married couples to single folks. After getting married, both parties automatically land in Tax Class 4, but can choose between Tax Classes 3 or 5 as well. These classes are particularly advantageous if there’s a large disparity between the couple’s incomes. For example, the high-earning partner can choose Tax Class 3, while the lower earner can file under Tax Class 5 — which means higher tax savings for both of them. Our tip: Learn which Tax Class is most advantageous for you with this handy online calculator.

So, what does all this mean for singles vs. married people in practical terms? For example, with an annual gross income of €50,000, singles pay around €11,344 (22.69%) in taxes. However, a married person with the exact same salary pays just €6,560 (13.12%) in taxes. This means that although many singles have to manage their living costs all on their own, their tax burden is almost double that of a married person. 

Why is this? Well, according to the state, marriage comes with security. The law sees marriage as a kind of solidarity contract, in which one person can pay for the other in an emergency — meaning they might not need to rely on government assistance or social security. Therefore, in the eyes of the state, married people are entitled to a tax break for taking on this burden. And this idea is firmly anchored in German law, even though fewer and fewer couples are choosing to marry, and the divorce rate has climbed sharply since the 1960s. The state also offers tax breaks to married couples because marriages often produce children. But this logic is also somewhat flawed: These days, 33% of children are born to unmarried parents, compared to 6% in the 1960s. 

As you can see, the financial strain of being single is deeply entrenched, although many of the financial benefits for married couples seem archaic and outdated. But there are still ways to save money as a single person! Let’s take a look. 

To save money on rent, it could be worth downsizing and moving into a smaller apartment. It may be the perfect opportunity to declutter, and maybe even make some money off the things you no longer need. 

Even if you live in a two- or three-room apartment, you still have plenty of chances to save with a roommate or two. And it doesn’t have to feel like student life, either. Find someone you love spending time with, or offer a spare room to someone who only needs it part-time. Or, while you’re on vacation or staying with friends, rent out your entire apartment to earn some extra money. 

If you’re feeling really bold, try some form of alternative living, like living on an organic farm or renting a parking spot for your decked-out mobile home. 

The current energy crisis is hitting singles especially hard. With electricity and heating costs skyrocketing, most have to cover these costs all on their own. High gas bills currently have more to do with the geopolitical situation in Europe than with individual consumption. Nevertheless, it’s still helpful to be mindful of how you’re using resources. For example, you can save water by taking shorter showers. You can also save on electricity by turning off your electric stove or oven a little early and letting your food finish cooking in the residual heat. It’s also a good idea to review your utility bills carefully — there are certain ancillary costs that landlords can’t pass on to tenants. 

Even your trip to the grocery store offers lots of opportunities to save. Fresh bread is cheaper to buy at the end of the day, rather in the morning, and packaged goods that are officially about to expire are often discounted, but are usually good long past their best-before date. Apples sold in large two-kilogram bags are often cheaper — and they’re usually tastier, too! And did you know that the leaves from cauliflower, turnips, and radishes are edible? Fresh radish leaves are perfect for smoothies and pesto, or as a substitute for spinach in warm dishes. 

Love eating with others? Then make cooking dates with your besties instead of eating in restaurants. If you split the costs, it will likely only add up to a few euros per person. Sebastian Mass’s book “Kochen ohne Kohle” (in German) has tons of cheap and creative recipes if you’re short on ideas. And if you’re feeling too lazy to cook, take advantage of platforms like “Too Good To Go” and fight food waste while saving on your grocery bill at the same time.

Besides cutting back on your spending, your other option is to earn some money on the side and increase your income. Or, gather up your courage and ask for a raise! 

Are you freelance and living in a city? Instead of working in a cafe or coworking space, set up shop in a library instead. They’ve got internet, peace and quiet, and it costs (almost) nothing. Plus, library cafes are generally cheaper than restaurants if you get hungry — or you can just bring food from home.

All work and no play doesn’t sound very appealing — but you can still find ways to save on your leisure activities. If you get along well with your neighbors, then why not share a newspaper or Netflix subscription, or borrow practical items instead of buying them yourself? This not only saves you money, it can strengthen your community. 

And it’s completely possible to have fun on the cheap. There are plenty of sports you can do for free. Plus, many museums, theaters, and other cultural institutions offer discounts or even free admission at certain times or on certain days.  

Car sharing is always cheaper than owning your own car, and cycling and e-scooters are even cheaper — and more eco-friendly. If you live in Berlin and have family or friends with an annual pass, they can bring you along on public transit free of charge all weekend, starting at 8 p.m. on Fridays. 

If you live in the countryside and can’t do without a car, then try carpooling to save money. The average car sits unused for 23 hours per day, so it’s cheaper and more sustainable to put several people on your car insurance and share the costs of an owned or rented vehicle. 

Renting a room in a private apartment is a good alternative to expensive single rooms in a hotel — you can try Airbnb or ask for tips on social media platforms. Hostels also have shared rooms, and even private ones at a fraction of the cost of a hotel room. It can be a great way to meet new people, too. If your vacation budget is tight, try a biking route like the Murradweg or the Elberadweg — pitch your tent at each stop, or stay in a rustic hut in the mountains. 

Not a fan of the great outdoors? There are plenty of cheap travel destinations in Europe where you don’t have to break the bank to have a good time. Check them out here! 

Freelancers can’t avoid filing taxes, but even if your income tax is automatically deducted from your monthly salary, it’s worthwhile to file a tax return. Thanks to digital tools, it’s much less tedious these days to figure out your taxes. And filing a tax return is worth it: On average, employees who file get €1,072 back from the tax authorities. From account management fees to liability insurance to surprise expenses, you can deduct lots of everyday costs from your tax return. 

Lastly, it helps to talk to others openly about money. This way, you learn which costs you can share with friends or family members, and can get support if you’re feeling overwhelmed. There could be plenty of people around you who are facing a similar financial situation. You’ll also learn how others save and spend, and can cultivate a positive money mindset — all while taking charge of your finances.  

Whether you’re single or in a relationship, living within your means is mostly about building good habits. With an N26 account, you can set daily spending and withdrawal limits in seconds right from your smartphone, helping you easily stay on budget. Our smart Monthly Wrap-Up feature tells you how much you spend and how much you’ve saved, so you can keep tabs on your money. And if things get tight at the end of the month, you can split your purchase payments up with N26 Installments and pay the rest back over time. 

Looking to put money aside for a rainy day? With N26 Smart, You, and Metal accounts, you can create up to 10 Spaces sub-accounts. These virtual piggy banks sit right alongside your main account, allowing you to save for your unique goals. Want to manage your money with your partner, family, or friends? Then try Shared Spaces, where you can pool your money together for your collective saving goals. Not an N26 customer yet? Compare our accounts and discover the one that best suits your needs — and your relationship status.