The income tax declaration for pensioners in Germany is a maze of numbers and paragraphs. However, with the right knowledge, it is possible to skillfully navigate through the fiscal complexities and save money. Pension income is considered like other incomes and is therefore subject to taxation. But don’t worry, there are numerous deductions and possibilities for tax relief that can significantly reduce the tax burden. In this article, we examine which pension incomes must be taxed and how smartly using deductions can help save on taxes.
Understanding and Optimizing the Taxable Portion of Your Pension
Pensioners in Germany face the challenge of having to tax an increasingly substantial part of their pension. Despite the complexity, it is worthwhile to know and utilize the taxable portions exactly. At the center of these considerations are the pension allowance and the general allowance. The pension allowance, which varies depending on the year of retirement, provides a solid basis for planning. Once established, it remains constant throughout the entire pension period. For example, for pensioners retiring in 2025, a lower pension allowance rate of 16% is anticipated, meaning that a larger percentage of their pension income will be taxable.
In addition to the pension allowance, the general allowance is a decisive factor. For 2025, it is set at 12,096 euros for singles and 24,192 euros for married couples. These amounts provide important guidance, as incomes below this threshold remain tax-exempt, which significantly affects the amount of taxable income.
Calculating the taxable portion of the pension requires precise knowledge and attention. If a person retires in 2025, 83.5% of their pension will be subject to taxation. However, to mitigate the tax burden, it is possible to deduct social contributions such as health and nursing insurance, which represent about 12% of the gross pension. Additionally, deductions such as the lump-sum professional expense reimbursement of 102 euros and the reimbursement for extraordinary expenses of 36 euros further help reduce taxable income.
A practical example clarifies this process: let’s assume that a person receives a gross monthly pension of 1,600 euros. This pensioner, who retired in 2020, benefits from a pension allowance of 20%, which means that 80% of the pension, or 15,360 euros, will be taxable. After subtracting social contributions and lump-sum deductions, the taxable portion reduces to 13,120 euros.
As soon as taxable incomes exceed the general allowance, income tax applies. Here, the first euro in excess is taxed at a marginal rate of 14%. It is important to know that the tax authorities automatically receive data on pensions, which affects the obligation to file a tax return. Therefore, pensioners must actively pay attention to filing their tax return when their taxable income exceeds the relevant thresholds.
Last but not least, one should not forget other investment income or ancillary earnings. These must be included in the total calculation to correctly determine the relevant amount for tax purposes.
By carefully implementing the strategies and measures mentioned, pensioners can correctly consider and optimize the taxable portion of their pension income, thereby helping to reduce their financial burden in old age.
Cleverly Using Tax Benefits: Best Lightening Your Pension
Tax allowances and deduction possibilities offer pensioners a valuable tool to reduce the tax burden. It is not uncommon for pensioners to be surprised by the complexity of tax provisions, but with the right overview, it is possible to achieve significant savings.
General allowance and pension allowances: The general allowance ensures that the minimum living expenses remain tax-exempt. For singles, it amounts to 12,096 euros, and for married couples, 24,192 euros in 2025. Additionally, there are special allowances for pension income; here singles can receive up to 13,132 euros annually tax-exempt, and married couples up to 26,264 euros. The increasing taxable portion of the pension, which already amounts to 83.5% in 2025, requires careful planning to fully utilize the benefits of these allowances.
Practical deduction opportunities: When it comes to deductions, professional expenses offer an interesting opportunity to reduce the tax burden. These include costs for professional travel, necessary work materials, and the professional use of a phone and the internet. Moreover, extraordinary expenses such as contributions for health, nursing, and pension insurance can be tax-deductible. Here, it is important to pay attention to the complete deductibility of the contributions for health and nursing insurance.
Further tax reduction opportunities: Donations to charitable organizations can be deducted up to 20% of total income as extraordinary expenses, and donations to political parties can even directly reduce the tax debt by half. Alimony payments, church taxes, and expenses for childcare and private schools can also be tax-deductible.
Strategies for optimal use: To effectively exploit the tax benefits, pensioners should always file a tax return, even if they are not initially required to do so. Only in this way can all potential benefits be systematically utilized. It is important to document all deductible expenses in detail. Modern tax software simplifies the precise identification of all possible deductible items and contributes to an error-free tax return.
Conclusion: Smartly using tax allowances and deduction opportunities can mean a significant reduction of the tax burden for pensioners. With a targeted and informed approach, it is possible to make the most of the complex tax provisions.