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).
• 2024: Singles can deduct up to 27,566 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 BFH confirmed the current pension taxation as constitutional, although future pension years could be affected. The legislative changes are intended to prevent this issue.

Full deduction of pension expenses from 2023

Which pension contributions can I enter as pension expenses?

Pension expenses refer to contributions to the state pension insurance, Rürup pension, agricultural pension fund, and occupational pension schemes. Employees can also claim voluntary contributions to the state pension insurance and the agricultural pension fund.

Employer's contribution to pension insurance:

As the employer's contribution to the state pension insurance is also taken into account, the deductible special expenses are often lower. Pension expenses can be claimed up to a maximum amount, which is linked to the maximum contribution to the miners' pension insurance.

Maximum amounts 2024:

• 27.566 Euro for single persons
• 55.132 Euro for married couples

Since 2023, these contributions have been 100% tax-deductible.

Other insurance expenses:

Additionally, other insurance expenses such as contributions to health and long-term care insurance can be deducted:

• Up to 1.900 Euro if you receive tax-free subsidies for health insurance.
• Up to 2.800 Euro if you do not receive tax-free subsidies.

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 subject to insurance 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.

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 an employee and an employer share. Both shares count as deductible pension expenses. Pension expenses can be deducted as special expenses up to a specified maximum amount, with the deductible share having increased annually until 2023 and amounting to 100% since 2024.

Maximum amounts for 2024

In 2024, you can deduct pension contributions up to the following maximum amounts:

• Single: 27.566 Euro
• Married: 55.132 Euro

These contributions have a 100% tax-reducing effect.

Calculation of the deductible amount

Your pension contributions are half paid by your employer, and you pay the other half yourself. However, the employer's share must be deducted from the deductible pension expenses as it is already tax-free.

Example:

You pay 5.000 Euro into the pension insurance, and your employer also pays 5.000 Euro. Of the total annual contribution of 10.000 Euro, you can deduct 5.000 Euro (your own share), as the employer's share cannot be considered for tax reduction.

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

When am I compulsorily insured in the statutory pension insurance?

Compulsory members of the statutory pension insurance are:

• Employees in regular employment,
• 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,
• People with disabilities in workshops for the disabled and similar institutions,
• Unemployed persons receiving state benefits,
• Self-employed persons subject to pension insurance.

Exemption from statutory pension insurance

Are you exempt from pension insurance? In this case, you can claim contributions to a substitute life insurance policy for tax purposes. This also applies to voluntary contributions to the statutory pension insurance or to occupational pension schemes. Make sure to deduct tax-free employer contributions or reimbursements.

Tip: Deduct voluntary contributions

You can also deduct voluntary contributions to the statutory pension insurance, e.g. for continued insurance or to secure disability pensions. As a mini-jobber, you can enter your employee contribution if you have opted out of the exemption from pension insurance.

The contributions are subject to the maximum amount for pension expenses. In 2024, up to 27.566 Euro for singles and 55.132 Euro for married couples can be deducted. These contributions have a 100% tax-reducing effect.

When am I compulsorily insured in the statutory pension insurance?

What are contributions to agricultural pension funds?

Farmers pay contributions to agricultural pension funds for themselves, their spouse, and possibly for family members working on the farm. These funds are part of the agricultural social security system and allow farmers to build up a funded pension scheme, similar to the statutory pension insurance for employees.

The amount of the contributions is usually based on the economic performance of the agricultural business. Employees can also declare contributions to agricultural pension funds and voluntary statutory pension insurance in their tax return. Any subsidies received must be deducted from the amounts paid in to avoid double benefits.

In 2024, pension contributions of up to 27,566 Euro for single persons and 55,132 Euro for married couples can be claimed as special expenses for tax purposes. These contributions are 100% tax-deductible and fully reduce the taxable income.

Important: Contributions to the agricultural pension fund differ from other pension schemes such as the Riester pension or statutory pension insurance, as they are specifically set up for agricultural businesses.

What are contributions to agricultural pension funds?

What are contributions to occupational pension schemes?

Members of the liberal professions such as doctors, lawyers, notaries, tax consultants, or architects can make contributions to occupational pension schemes. These schemes are part of profession-specific pension provision and offer similar benefits to the state pension insurance. For the contributions to be recognised for tax purposes, the pension scheme must offer benefits comparable to those of the state pension insurance.

In 2024, pension contributions of up to 27.566 Euro (for single persons) and 55.132 Euro (for married couples) can be deducted as special expenses. These contributions have a 100% tax-reducing effect and fully reduce the taxable income.

Occupational pension schemes differ from private pension schemes as they are mandatory pension schemes for certain professional groups and are legally regulated. Unlike private pension schemes, such as the Riester pension, there is a direct link to the professional activity.

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 homemakers.

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”.

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 employment with a maximum salary of 538 Euro per month. Mini jobbers are generally subject to compulsory statutory pension insurance but can apply for an exemption.

Contributions to pension insurance:

• If no exemption has been applied for, the employer pays a flat rate of 15% (in the commercial sector) or 5% (in the household sector) towards pension insurance.
• The mini jobber must pay the difference to the regular pension insurance contribution rate themselves (top-up).

Tax consideration:

Mini jobbers can choose whether to declare the employer's and employee's contributions to pension insurance as pension expenses in their tax return. This is only worthwhile if you have topped up the pension insurance contributions, i.e. paid the difference yourself.

Entry in the tax programme:

Enter the employer's contributions to statutory pension insurance from a marginally paid job subject to flat-rate tax in Lohnsteuer kompakt under "Pension expenses > Pension provision > Other compulsory insurances".

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 not financed on a pay-as-you-go basis; instead, it is funded. The money paid into the private Rürup contract is not immediately disbursed to pensioners but is saved and earns interest. The actual 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. The insured pay their contributions monthly or annually; one-off payments are also possible. They are particularly tax-advantaged.

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, known as an 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 dropped 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, but above-average returns are possible. The Rürup pension is also secure in the event of unemployment. Since no money can be paid out before the pension starts, 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 are, 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 benefits. However, the contract with the insurance company must allow for a contribution pause.

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 who cannot use a Riester or company pension: such as 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 not be paid out before the age of 60. For contracts concluded from 1 January 2012, the insurance contract may only provide for the payment of the annuity upon reaching 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.

Who is the Rürup pension suitable for?

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

Contributions to the Rürup pension (basic pension) can be claimed as special expenses in the tax return. These contributions count as retirement provision expenses and are subject to certain maximum amounts.

Maximum limits:

• For single persons: Up to 27.566 Euro in 2023.
• For married couples: Up to 55.132 Euro in 2023.

Tax consideration:

Since 2023, 100% of the contributions up to the maximum limit can be deducted for tax purposes. This regulation was originally planned for 2025 but was brought forward.

Entry in the tax return:

Enter the contributions to the Rürup pension in the "Vorsorgeaufwendungen" section of the income tax return. There is an area for "Altersvorsorgebeiträge".

Taxation of the pension:

The pension you receive later will be taxed gradually. For pensioners from 2024, the taxable portion is 83% and increases annually by 0.5 percentage points until full taxation is reached in 2058.

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 survivor insurance. Consumer protection groups and the German Insurance Federation generally advise against such combinations. Although you may benefit more from a tax perspective than with individual insurances, the premiums for disability insurance are often higher in combination than for individual products.

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

These additional contracts do not conflict with the tax requirements for a Rürup policy and are therefore subsidised. However, the proportion of additional products in the total contribution 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.

Is a Rürup pension worthwhile in combination with supplementary insurance?