When are pensioners required to submit a tax return?

Pensioners are required to submit a tax return if their total income exceeds the annual basic allowance. In 2024, the basic allowance is:

• 11.784 Euro for single persons
• 23.568 Euro for married couples

Taxable income:

• State pension (Anlage R)
• Private pensions
• Rental income (Anlage V)
• Capital income (Anlage KAP)
• Other income

Taxable portion of the pension:

Not the entire pension is taxable. The taxable portion depends on the year the pension started:

• For new pensioners in 2024: 83% of the pension is taxable.
• For pensioners who retired before 2005: 50% of the pension is taxable.

A personal pension allowance is set in the second year of retirement and remains unchanged for life. Pension increases from the third year of retirement are fully taxable.

Example:

Mr Mustermann, who retired in 2005, has an annual pension of 30.000 Euro. His tax-free allowance is 15.000 Euro. As long as his total income does not exceed the basic allowance, he does not have to submit a tax return. However, with a net annual income of 15.000 Euro, a single pensioner would exceed the basic allowance and be required to submit a tax return.

Tip: Pensioners should claim possible income-related expenses to reduce their tax burden. This includes, for example, the income-related expenses allowance of 102 Euro.

When are pensioners required to submit a tax return?

What is the retirement relief amount?

The tax relief for older people can be claimed by pensioners who earn additional income or wages alongside their pension. This includes, for example:

• Income from renting,
• Capital assets,
• Income from self-employment,
• Income from private sales transactions,
• Income from a Riester pension.

Before calculating the tax relief for older people, the tax office deducts certain allowances such as the saver’s allowance and work-related expenses.

What is the amount of the tax relief for older people?

The amount of the tax relief for older people depends on the birth year of the taxpayer. The percentage of income and the maximum amount are gradually reduced. The Growth Opportunities Act has slowed this reduction from 2023. The percentage now decreases annually by only 0.4 percentage points (instead of 0.8 percentage points), and the maximum amount decreases annually by only 19 Euro (instead of 38 Euro).

Examples of the amount of the tax relief for older people:

• Born in 1958 (64th birthday in 2022): From 2023, the tax relief is 14.0% of income, up to a maximum of 665 Euro.
• Born in 1959 (64th birthday in 2023): From 2024, the tax relief is 13.6% of income, up to a maximum of 646 Euro.
• Born in 1960 (64th birthday in 2024): From 2025, the tax relief is 13.2% of income, up to a maximum of 627 Euro.
• Born in 1961 (64th birthday in 2025): From 2026, the tax relief is 12.8% of income, up to a maximum of 608 Euro.

Note on the duration of the reduction

The legal adjustment extends the duration of the reduction of the tax relief for older people until 2058. This means the amount is reduced more slowly for younger generations but remains in place for life.

What is the retirement relief amount?

Which pensions must be declared in the tax return?

Pensions are generally subject to income tax. There are different tax rules:

• Pensions taxed with the new taxable portion, more precisely: fully taxable after deduction of the personal pension allowance. This applies to all pensions from the statutory pension insurance, the "Rürup" pension, and pensions from professional pension schemes.
• Pensions taxed with the favourable yield portion. This applies, for example, to pensions from private pension insurance.
• Pensions taxed with the special yield portion according to § 55 EStDV. This applies to life annuities with a fixed term, e.g. occupational or disability pensions from private insurance.
• Pensions fully taxable as "other income". This mainly concerns the state-subsidised Riester pension and the non-compliant use of Riester contracts, as well as benefits from occupational pension schemes whose contributions remained tax-free, e.g. from pension funds, pension schemes, and direct insurance.
• Pensions fully taxable as "income from employment". This applies to civil service pensions, company pensions from a direct commitment or support fund, as well as corresponding survivor benefits. These pensions are not to be entered in "Anlage R", but in "Anlage N".
• Pensions that are fully tax-free, e.g. pension from statutory accident insurance. You do not need to declare these pensions in the tax return.

Pensions, e.g. company pensions, for which you have received a pay-as-you-earn tax certificate, please enter in Anlage N.

Which pensions must be declared in the tax return?

Next stage for retirement at 67 begins!

Next stage for retirement at 67 begins!

In 2024, those born in 1959 will reach the age of 65 and thus approach the previous statutory retirement age. However, since the introduction of "retirement at 67" in 2012, the standard retirement age has been gradually raised. This particularly affects the generations now looking to retire.

Standard retirement pension

Since 2012, the retirement age has been gradually increased from 65 to 67. Initially by one month per birth year, and from 2024 by two months per birth year. The 1946 birth year was the last to retire at 65 without deductions. From the 1947 birth year, the retirement start was delayed by one month each year.

Example: Someone born on 15 February 1947 could not receive their pension from 1 March 2012, but only from 1 April 2012 without deductions.

Currently (from 2024): Those born in 1959, reaching the age of 65 in 2024, must now work 14 months longer to receive the statutory pension without deductions. This increase applies until the final standard retirement age of 67.

Pension for those with particularly long insurance periods

Since 1 July 2014, insured persons with 45 contribution years can retire at 63 without deductions. However, this age limit is gradually being raised to 65 for those born between 1953 and 1964.

Example: Those born in 1961 will turn 63 in 2024. If they have completed 45 contribution years, they can receive their pension at 63 years and 18 months, i.e., at 64 years and 6 months. From the 1964 birth year, the deduction-free pension is only possible at 65.

Pension for those with long insurance periods

Those with 35 contribution years can retire early at 63 but must accept deductions. These deductions are permanently 0.3% per month the pension starts before the standard retirement age.

Example: Those born in 1961 can apply for the retirement pension at 63 in 2024 but must accept a lifelong deduction of 12.6%.

Disability pension

Disabled persons with at least 35 insurance years are entitled to a deduction-free retirement pension. Here too, the retirement age is gradually being raised:

• Born in 1960: Pension without deductions at 64 years and 4 months.
• Born in 1961: Pension without deductions at 64 years and 6 months.
• Born in 1963: Pension without deductions at 64 years and 6 months, with an early retirement from 61 years and 10 months incurring a deduction of 10.8%.

Protection of legitimate expectations:

Those born before 1 January 1964, who were disabled on 1 January 2007 and received adjustment payments from mining, can still retire at 63 without deductions. With a deduction of 10.8%, this pension can be received from 60.

Reduced earning capacity pension

In the case of full reduced earning capacity, retirement before the standard retirement age is possible, but with deductions. These are 0.3% per month, but a maximum of 10.8%. Since 1 January 2019, the so-called credit period for reduced earning capacity pensions has been extended. It ends at 65 years and 8 months for a pension start in 2024 and will be gradually raised to 67 by 2031.

Note: The improvements only apply to new reduced earning capacity pensions from 1 January 2019. Older pensions will not be recalculated.

Widow's or widower's pension

The age limit for the large widow's or widower's pension is being gradually raised from 45 to 47 by 2029. In the event of a death in 2024, the age limit is 46 years and 2 months. The large widow's or widower's pension amounts to 60% of the deceased spouse's retirement pension. Below this age limit, only the small widow's or widower's pension is available, which is 25% of the deceased partner's retirement pension.

Pension taxation

Pension taxation is also increasing. For pensions starting in 2024, the taxable portion of the pension is 83%. The fixed personal pension allowance remains unchanged from the third year of retirement. From this point, the pension is fully taxed after deducting the allowance and the 102 Euro income-related expenses allowance.

Next stage for retirement at 67 begins!

Pensioners: Tax exemption for the basic pension supplement

Since 1 January 2021, there has been a basic pension for long-term insurance in the statutory pension insurance. This is not a new type of pension, but merely a supplement to the statutory pension (introduced with the "Act on the Introduction of the Basic Pension for Long-Term Insurance in the Statutory Pension Insurance with Below-Average Income and for Further Measures to Increase Retirement Income" - Basic Pension Act - of 12 August 2020).

• The calculation of the individual basic pension supplement is based on a legally defined calculation method. An income test is carried out to determine the basic pension requirement. If the income exceeds legally defined income allowances, the basic pension supplement is reduced. An entitlement to a basic pension supplement may therefore vary in amount in individual years due to the income test.
• The introduction of the basic pension supplement aimed to strengthen confidence in the basic promise of the welfare state to provide security and in the performance of the statutory pension insurance. Against this background, it should also be ensured from a tax perspective that the basic pension supplement, which recognises the lifetime achievement of the entitled person, is not reduced.

Retroactively from 2021, the portion of the pension paid due to the basic pension supplement is tax-free. This means that the basic pension supplement is available in full without tax deductions and can contribute unimpeded to securing the livelihood (§ 3 No. 14a EStG, inserted by the "Annual Tax Act 2022").

In many cases, a basic pension supplement was already paid in 2021. Consequently, this partial amount was reported to the tax authorities in the pension reference notification for 2021 and treated as taxable. For the retroactive tax exemption, the statutory pension insurance providers are now required to submit corrected pension reference notifications to the tax office, indicating the amount of the tax-free basic pension supplement.

If an income tax return has already been submitted for 2021 and the tax assessment has even become final, the tax office will now correct it. However, the change will only be made to the extent resulting from the corrected pension reference notification. Other amendment regulations remain unaffected (§ 52 para. 4 sentences 5 to 8 EStG).

Pensioners: Tax exemption for the basic pension supplement

Which pensions do not need to be declared in the tax return?

Pensions are generally subject to income tax.

However, some types of pensions are completely tax-free and do not need to be declared. These include, for example:

• Pensions from statutory accident insurance (e.g. occupational injury pensions),
• War and disability pensions,
• Monetary pensions paid directly as compensation for suffering under Nazi or GDR injustice.

Compensation pensions for increased needs, loss of maintenance and services, as well as pain and suffering pensions, are not considered income.

Which pensions do not need to be declared in the tax return?

Which pensions are taxable?

Most pensions are subject to tax. This includes old-age pensions and disability pensions, (large and small) widow's or widower's pensions, orphan's pensions, company pensions (from direct insurance) and pensions from life insurance policies. Different tax regulations apply depending on the type of pension.

You do not have to pay tax on a pension received from statutory accident insurance (employers' liability insurance association), a war pension, a severe disability pension, a compensation pension, a damages pension for loss of maintenance under section 844 (2) BGB, a thalidomide pension, an SED victims' pension, a damages pension for HIV-infected or AIDS sufferers, or a lifelong lottery pension.

Which pensions are taxable?

Which allowances can pensioners use?

What allowances can pensioners use?

Pensioners who submit a tax return can claim various allowances and lump sums to reduce their taxable income.

1. Pension allowance

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

2. Allowance for civil servants and company pensioners

• The allowance applies to pensions and company pensions.
• For pensioners in 2024, the allowance is 13.6% of the payments, up to a maximum of 1.020 Euro, plus a supplement of 306 Euro.
• Including the standard allowance for income-related expenses, up to 1.428 Euro remain tax-free.

3. Old-age relief amount

• Applies to pensioners with additional income.
• Those who turned 64 in 2023 receive 13.6% from 2024, up to a maximum of 646 Euro.
• Those who turn 64 in 2024 receive 13.2% from 2025, up to a maximum of 627 Euro.

4. Standard allowance for income-related expenses

• Pensioners receive a standard allowance for income-related expenses of 102 Euro per year.
• Higher income-related expenses (e.g. tax consultancy costs) can be claimed alternatively.

5. Special expenses

• Contributions to health and long-term care insurance can be declared as special expenses in the "Anlage Vorsorgeaufwand".
• Donations are also deductible as special expenses. If there are none, a lump sum of 36 Euro is deducted.

6. Extraordinary burdens

• Extraordinary burdens such as nursing home costs, household help, craftsmen's services, and medical expenses (e.g. for glasses, dentures) can be deducted.

7. Mini job

• Pensioners over 65 who have a mini job receive this income tax-free.

Tip: If a pensioner's income with all allowances and lump sums is below the basic allowance of 11.784 Euro (2024), no taxes are due.

Which allowances can pensioners use?