Full deduction of pension expenses from 2023

Contributions to the statutory pension insurance and other basic pension schemes are deductible as special expenses (§ 10 para. 1 no. 2a EStG).

Until 2025, pension contributions will gradually reduce taxes, starting at 60% in 2005 and increasing to 100% by 2025 (§ 10 para. 3 EStG).

• 2021: Singles can deduct up to 25,787 Euro (92% tax-reducing).
• 2022: Singles can deduct up to 25,639 Euro (94% tax-reducing).

From 2023, pension contributions are 100% deductible, increased by 4 percentage points in 2023 and 2 percentage points in 2024 (§ 10 para. 3 sentence 6 EStG, "Annual Tax Act 2022").

• 2023: Singles can deduct up to 26,528 Euro (100% tax-reducing).

This change aims to avoid "double taxation" of pensions from basic provision, as determined in Federal Fiscal Court rulings of 19.5.2021 (X R 20/19 and X R 33/19). The court confirmed the current pension taxation as constitutional, although future pension years could be affected. The legislative changes are intended to prevent this issue.

(2023): Full deduction of pension expenses from 2023

Which pension contributions can I enter as pension expenses?

Pension expenses include contributions to the state pension insurance, the Rürup pension, the agricultural pension fund, and the occupational pension scheme. Employees can enter contributions to agricultural pension funds and contributions to a voluntary state pension insurance.

Since the employer's contribution to the state pension insurance is also included, the special expenses are much lower. Pension expenses can be claimed up to a certain maximum amount. Since 2015, the maximum amount has been linked to the maximum contribution in the miners' pension insurance, rounded up to a full euro amount.

In 2023, pension contributions are fully deductible up to 26.528 Euro for singles and 53.056 Euro for married couples. These contributions have a 100% tax-reducing effect, contrary to initial plans.

Other insurance expenses are deductible up to 1.900 Euro in total if the taxpayer receives tax-free subsidies for their health insurance or allowances for medical expenses. If they do not receive these tax-free subsidies, they can claim other insurance expenses up to 2.800 Euro.

(2023): Which pension contributions can I enter as pension expenses?

Which contributions to the statutory pension insurance can I specify?

Contributions to statutory pension insurance, referred to since 1 October 2005 as Deutsche Rentenversicherung Bund and Deutsche Rentenversicherung Knappschaft-Bahn-See, are deductible as pension expenses under special expenses.

You can also deduct the following as contributions to statutory pension insurance:

• Mandatory contributions you make as a self-employed person to a statutory pension insurance, e.g. as a craftsman, teacher, educator, carer, midwife, or if you work in a domestic trade.
• If you are voluntarily insured upon your own application.
• If you pay contributions to the Künstlersozialkasse as an artist, journalist, or author, you can declare your own share of the contributions, but not the subsidies from the Künstlersozialkasse.
• As a self-employed person, you can also make voluntary contributions to maintain disability insurance. You can declare these contributions.
• If you voluntarily supplement your training period with contributions to the statutory pension insurance, you can declare these contributions.
• If you compensate for a pension reduction that you would incur if you took your pension early, you can declare the contributions.
• Contributions to a statutory pension insurance abroad are also deductible here.

(2023): Which contributions to the statutory pension insurance can I specify?

How are your contributions to the statutory pension insurance taken into account?

Contributions to the statutory pension insurance consist of the employee and employer share. The employer's share in the statutory pension insurance is also considered deductible pension expenses.

Pension expenses can be claimed as special expenses up to a certain maximum amount, although they only have a tax-reducing effect at a certain deduction rate. This deduction rate will increase to 100 per cent by 2023.

In 2023, pension contributions are fully deductible up to 26.528 Euro for singles and 53.056 Euro for married couples. These contributions have a 100% tax-reducing effect.

Your contributions to the statutory pension insurance are half paid by your employer, and you pay the rest. From your pension expenses, which are only partially deductible, you must therefore fully deduct the employer's share again.

Example: You pay 5.000 Euro into the pension insurance, and your employer pays the same amount. Of this 10.000 Euro annual contribution, your deductible share (100 per cent) is 10.000 Euro. However, since you have already received the employer's share tax-free, you must deduct it again, leaving 5.000 Euro that actually have a tax-reducing effect.

(2023): How are your contributions to the statutory pension insurance taken into account?

When am I compulsorily insured in the statutory pension insurance?

Mandatory members of the statutory pension insurance include:

• All regular employees,
• Insured persons during the three-year child-raising period,
• Employees in marginal employment who do not opt out of pension insurance,
• Employees in the public sector,
• Disabled employees in sheltered workshops and similar institutions,
• Unemployed persons receiving state support,
• Self-employed persons subject to pension insurance.

Are you exempt from statutory pension insurance?
If you do not have to pay contributions to the statutory pension insurance because you are exempt, you can enter the contributions for a (exempting) life insurance policy. This also applies to contributions you pay to remain voluntarily insured in the statutory pension insurance or contributions to an insurance or pension group related to your profession. Remember to deduct tax-free employer subsidies or refunds of contributions before entering them.

Voluntary contributions: Here you can also deduct the contributions to the statutory pension insurance that you make voluntarily. This applies in the case of increased or continued insurance or if you pay voluntary contributions to maintain entitlement to a disability pension. If you, as a mini-jobber, do not exercise your right to opt out of pension insurance, please enter your employee share as well.

Voluntary contributions are also limited to the maximum amount for pension expenses. In 2023, pension contributions are deductible up to 26,528 Euro for singles and 53,056 Euro for married couples. These contributions have a 100% tax-reducing effect, contrary to initial plans.

(2023): When am I compulsorily insured in the statutory pension insurance?

What are contributions to agricultural pension funds?

These are contributions paid by a farmer for themselves, their spouse, and possibly for family members working on the farm, to build up their own funded pension scheme. Employees can enter contributions to agricultural pension funds and contributions to a voluntary state pension insurance. Contribution subsidies must be deducted.

In 2023, pension contributions are fully deductible up to 26.528 Euro for single persons and 53.056 Euro for married couples. These contributions have a 100% tax-reducing effect, contrary to initial plans.

(2023): What are contributions to agricultural pension funds?

What are contributions to occupational pension schemes?

Contributions to occupational pension schemes can be made by members of the liberal professions. This includes, for example, doctors, lawyers and notaries, tax advisors or architects. However, only contributions to such occupational pension schemes whose benefits are comparable to those of the statutory pension insurance provider are accepted. Employees can enter contributions to agricultural pension funds and contributions to a voluntary statutory pension insurance.

In 2023, pension contributions are fully deductible up to 26.528 Euro for single persons and 53.056 Euro for married couples. These contributions have a 100% tax-reducing effect, contrary to initial plans.

(2023): What are contributions to occupational pension schemes?

What does "voluntary statutory pension insurance" mean?

Individuals exempt from statutory pension insurance can make voluntary contributions to the statutory pension insurance and declare these in their tax return. This applies, for example, to the self-employed, civil servants, clergy, or housewives.

You cannot enter your regular contributions to statutory pension and nursing care insurance here, as these are not voluntary contributions. If you pay contributions to a state-subsidised private pension scheme, please enter them under the item “Riester pension”.

(2023): What does "voluntary statutory pension insurance" mean?

How should I declare contributions to the statutory pension insurance as a part-time employee (Minijob)?

A mini job is a form of marginal employment. The condition is that the mini jobber's salary does not exceed 520 Euro per month. Mini jobbers are subject to compulsory insurance in the statutory pension scheme. However, they can apply for an exemption. If you do not make use of the exemption, the employer pays the flat-rate contributions to the pension scheme amounting to 15% (in the commercial sector) or 5% (in the household sector), and the mini jobber must pay the difference to the normal pension insurance contribution rate from their own funds.

There is an option for the mini jobber to claim the employer's contributions and their own employee contributions as pension contributions. This only makes sense if you have not made use of the exemption from compulsory pension insurance and you have paid the difference to the normal pension insurance contribution rate, i.e. "topped up".

Please enter the employer's contribution to the statutory pension insurance for marginal employment subject to flat-rate taxation in Lohnsteuer kompakt on the page "Pension expenses > Pension provision > Other compulsory insurances".

(2023): How should I declare contributions to the statutory pension insurance as a part-time employee (Minijob)?

What is a Rürup pension?

Pension models are often named after their inventors. The Riester pension is named after the former Labour Minister Walter Riester. The Rürup pension is named after the economist Hans-Adalbert Rürup. It is very similar to the state pension insurance, but it is funded rather than pay-as-you-go. The money paid into the private Rürup contract is not immediately paid out to pensioners but is saved and earns interest. The official name for the Rürup pension is "private basic pension". The return on this private pension insurance comes from the interest on the contributions by the provider with whom it is taken out.

There is also the advantage that it is tax-advantaged by the state. The aim of the Rürup pension: The insured person receives a monthly pension for life, starting at the earliest at the age of 60. For contracts concluded from 1 January 2012, the insurance contract may not provide for the payment of the annuity before the age of 62. As it is linked to the life of the contributor, this form of insurance is also called an annuity insurance.

A Rürup pension insurance is taken out with a private insurance company. Policyholders pay their contributions monthly or annually, and one-off payments are also possible. They are particularly tax-advantaged.

(2023): What is a Rürup pension?

What forms of Rürup pension are available?

The Rürup policy can be taken out as either a traditional or a unit-linked life insurance. In both cases, the entitlement is a monthly pension payment, i.e., the annuity. A traditional life insurance invests the savings portion diversely in the capital market, mainly in bonds. The policyholder receives a profit share from the returns. The guaranteed interest rate was 1.75 percent for contracts concluded between 2012 and 2014, 1.25 percent for contracts from 1 January 2015, and it fell to 0.9 percent on 1 January 2017, and to 0.25 percent from 1 January 2022.

With unit-linked life insurance, the savings amount is invested in investment funds. Therefore, there is no guaranteed interest rate as with the traditional policy. The risk is slightly higher. However, an above-average return is also possible. The Rürup pension is also secure in the event of unemployment. Since no money can be paid out before the start of the pension, the savings are not considered disposable assets under the Social Security Code and cannot be seized during the accumulation phase.

The ongoing contributions and the accumulated capital are also not counted towards unemployment benefit II. During the pension phase, the payments - like all others - are then of course subject to seizure, at least above the non-seizable portion. Until then, periods during which no contributions are made for an extended period do not affect the tax incentives. However, the contract with the insurance company must also allow for a contribution pause.

(2023): What forms of Rürup pension are available?

Who is the Rürup pension suitable for?

In principle, a Rürup pension is suitable for anyone who wants to save for retirement with tax benefits. However, it is particularly interesting for those who are not covered by statutory pension insurance and cannot use a Riester or company pension: for example, the self-employed, freelancers, and business owners. The Rürup funding is also attractive for high earners.

With this type of private pension provision, policyholders do not receive bonuses like with the Riester pension. The state support consists of tax advantages, as Rürup contributions can be claimed as special expenses in the tax return.

However, the tax incentives for contributions are subject to conditions. This is to ensure that the Rürup contract is genuinely used for retirement provision. For example, the monthly pension may only be paid from the age of 60. For contracts concluded from 1 January 2012, the insurance contract may only provide for the payment of the annuity from the age of 62. Furthermore, the acquired entitlements cannot be pledged or sold. The tax incentives for the private basic pension relate to the contributions paid, as with other pension insurance schemes. Like payments to the statutory pension fund or professional pension schemes, they can be claimed as special expenses in the income tax return.

(2023): Who is the Rürup pension suitable for?

How can I claim contributions to a Rürup pension in my tax return?

The private basic pension, also known as the Rürup pension, has tax incentives. This means you can deduct the contributions you pay from your tax, but there is a limit. You can deduct these contributions along with other contributions to the state pension insurance and professional pension schemes up to a certain maximum amount. These contributions only reduce your taxes by a fixed percentage.

It is important to know that until 2023 there was a transitional phase during which the tax incentives were gradually introduced. Only from 2023 can you deduct the full contributions. The reason for this is the Retirement Income Act of 2005. This law changed the taxation of pensions, and to offset this change, the tax incentives for private pensions were gradually increased.

The percentage by which the contributions reduce tax increased by two percentage points each year until it reached 100 percent. It was originally planned that this would not be the case until 2025. However, due to a change in the law, this target was already reached in 2023.

In 2023, you can deduct a total of up to 26.528 Euro (for single persons) or 53.056 Euro (for married couples) in pension contributions, and these contributions reduce your taxes by 100 percent.

An important note: From 2023, the taxable portion of pensions will only increase by half a percentage point per year, instead of a full percentage point. This portion will not reach 100 percent until 2058. This is due to a change in the law, the "Growth Opportunities Act".

For pensioners who receive a pension for the first time in 2023, the taxable portion is therefore 82.5 percent of the pension amount.

(2023): How can I claim contributions to a Rürup pension in my tax return?

Is a Rürup pension worthwhile in combination with supplementary insurance?

Many insurance companies offer additional products with a Rürup pension insurance. For example, a policy can be combined with disability or dependants' insurance. Consumer protection groups and the German Insurance Federation generally advise against such combinations. Although this can be more tax-efficient than individual insurances, the premiums for disability insurance are often higher in combination than for individual products.

Dependants' insurance as an addition is also possible. This can provide for your relatives in the event of death, as they receive nothing from the Rürup pension after the insured person's death. There is no pension guarantee period with Rürup, during which money is paid to relatives for an agreed period after your death. However, in the event of a divorce, the claims from the dependants' insurance expire.

These supplementary contracts do not conflict with the tax requirements for a Rürup policy and are therefore also subsidised. However, the proportion of the total contribution for additional products must not be higher than the proportion for retirement provision itself. Additional insurances are also offered that guarantee a refund of contributions if the insured person dies before retirement. However, they are excluded from tax subsidies.

(2023): Is a Rürup pension worthwhile in combination with supplementary insurance?