(2022) Full deduction of pension expenses from 2023

Contributions to the statutory pension insurance - along with other contributions to basic provision, such as occupational pension schemes and Rürup pension insurance - are deductible as special expenses under pension expenses (§ 10 para. 1 no. 2a EStG).

Pension contributions are fully deductible up to a certain maximum amount, but they actually only have a tax-reducing effect with a certain percentage until 2025. This percentage changes annually, starting at 60% in 2005 and rising to 100% by 2025 (§ 10 para. 3 EStG).

• In 2021, pension contributions are fully deductible up to 25.787 Euro for singles and 51.574 Euro for married couples. Of this, 92% is tax-deductible, i.e. a maximum of 23.724 Euro or 47.448 Euro.
• In 2022, pension contributions are fully deductible up to 25.639 Euro for singles and 51.278 Euro for married couples. Of this, 94% is tax-deductible, i.e. a maximum of 24.101 Euro or 48.202 Euro.

From 2023 onwards – and not from 2025 – pension expenses are 100 percent deductible as special expenses. This increases the deductible expenses by 4 percentage points in 2023 and by 2 percentage points in 2024 (§ 10 para. 3 sentence 6 EStG, amended by the "Annual Tax Act 2022").

The change is also necessary in light of the Federal Fiscal Court rulings of 19 May 2021 (X R 20/19 and X R 33/19), as this measure can contribute in the first step to avoiding "double taxation" of pensions from the basic provision in the long term. In its rulings, the BFH once again confirmed the current design of pension taxation as constitutional. In the cases decided, there was no "double taxation" of retirement income. However, future pension cohorts could be affected, according to the BFH.

With its decisions of 19 May 2021, the highest German tax court for the first time set out the specific calculation parameters for any "double taxation" of pensions from the basic provision. The newly announced legislative changes are intended to help avoid possible "double taxation" in the future.