(2021) Which allowances can pensioners use?

Retirees who submit an income tax return can enter various allowances and incurred costs to reduce their taxable income.

Personal pension allowance
The pension allowance is determined in the second full year of receiving the pension. In the year the pension begins and in the second year, the pension is taxed at the so-called taxable rate. The remaining amount in the second year is the personal pension allowance, which remains tax-free for life. From the third year onwards, the pension is fully taxable after deducting the personal pension allowance and the standard allowance for income-related expenses of 102 Euro.

Allowance for civil servants and company pensioners
Like the pension allowance, the allowance for civil servants and company pensioners will gradually decrease to zero percent by 2040. This allowance only applies to pensions and company pensions from direct commitments and support funds. In addition, pensioners receive a supplement to the allowance, which also decreases over time.

Here are the figures for pension start in 2020:

If you retire in 2021, the allowance for you is 15.2% of the pension payments, up to a maximum of 1.140 Euro, and the supplement to the allowance is 342 Euro. Together with the standard allowance for income-related expenses of 102 Euro, the payments are tax-free up to 1.584 Euro for life.

The retirement relief amount can be used by retirees or pensioners who receive additional income or wages alongside their pension. Additional income includes, for example, income from renting, capital assets, self-employment, private sales transactions, or Riester pensions. However, the tax office first deducts various amounts (saver's allowance, income-related expenses allowance). The amount of the retirement relief depends on the retiree's year of birth.

If you turned 64 in 2020 (born between 02.01.1956 and 01.01.1957), the retirement relief amount for you is 15.2% of the income, up to a maximum of 722 Euro from 2021 for life.

If you turn 64 in 2021 (born between 02.01.1957 and 01.01.1958), you will receive a retirement relief amount of 14.4%, up to a maximum of 684 Euro from 2022 for life.

Standard allowance for income-related expenses
For the pension, every taxpayer receives a standard allowance for income-related expenses of 102 Euro per year.

Special expenses
Contributions to statutory health and long-term care insurance can also be entered as special expenses in the "Anlage Vorsorgeaufwand" by retirees. Retirees receive a health insurance subsidy from their pension insurance provider, which must be deducted from the contributions. Donations can be deducted as special expenses for tax purposes. The collected donation receipts thus reduce the taxable income. If you do not donate or have no other special expenses, the tax office deducts a flat rate of 36 Euro.

Extraordinary burdens
Particularly for older and sick people, extraordinary burdens can arise that reduce taxable income. This could be accommodation in a nursing home, employing a domestic help, or hiring a tradesperson. But also medical expenses, such as medication, glasses, or dental prostheses, can be claimed by retirees.

Mini job
If a retiree (over 65 years) takes on a 450-Euro job, this income is tax-free for them.