What if all pensioners suddenly disappeared

Pension taxation: when do pensioners actually have to pay taxes?

Many do not know, but pensioners are also generally subject to tax. However, they do not necessarily have to pay taxes. You can find out exactly how taxation works for pensioners here.

In June and July, pensioners in Germany receive mail: The pensions are usually increased (in the west, however, there will be a zero period in 2021).

But an unpleasant surprise can bloom with the pension increase. Because: Many retirees suddenly have to pay taxes.

Paying taxes as a pensioner? That's right, pensioners are generally taxable in Germany. The contributions that you made to the statutory pension during your working life reduced your tax burden until you retired. Because you can claim benefits as pension expenses in your tax return. In return, as a pensioner, you have to pay taxes on your pension insurance income.

This rule, toodownstream taxation called, has the advantage that the tax burden for pensioners is lower overall. The reason: pensions are generally not as high as the income in working life - and therefore also the taxes on the pension.

But just because pensions are taxable in themselves, that doesn't mean you really have to pay taxes. When exactly do I have to pay taxes? What is the tax rate? And, as a pensioner, can I deduct costs from tax? t-online.de answers the most important questions about pension taxation.

When do I have to pay tax as a pensioner?

Basically, every pensioner is obliged to pay taxes. However, many retirees are exempt from it - through the so-called Pension allowance and tax Basic tax allowance.

  • Pension allowance: This amount depends on the year you retire. By 2040 this amount will drop to zero. The pension exemption for new pensioners was still 20 percent in 2020. In return, that means: 80 percent would be taxable (see table). However, there is still the basic tax allowance.
  • Basic tax allowance: In addition to the pension allowance, there is the basic allowance, which guarantees all taxpayers a certain amount of income on which they do not have to pay any taxes. The following applies to pensioners: The basic tax allowance refers to the sum of your pension income that remains after deduction of the pension allowance. The basic tax credit increases a little every year. For the tax year 2019 it is 9,168 euros or 18,336 euros for married couples.

That means you would have to only then pay taxesif the taxable portion of your pension is above the annual basic allowance. And even then, that doesn't automatically apply. Because: You can deduct some of the expenses that you have as a pensioner from tax (see below).

As a pensioner, do I have to pay more tax every year?

No, not necessarily. It is also possible that you do not have to pay any tax on your pension (see above). But first things first: The taxation of the statutory pension depends on the Pension allowance and the Tax allowance from.

The pension allowance depends on the year in which you will retire (see above). If you retire from the year 2040, the pension exemption will no longer apply. Then the full part of your pension becomes taxable.

So if your pension rises slightly as a result of the annual pension adjustment, you may suddenly slip into tax liability. Because the pension exemption does not grow - it remains the same.

But be careful: taxes are only incurred if the amount that remains after deducting the pension allowance is above the tax allowance. This is the same for all taxpayers - and changes slightly every year (see above).

Because of this interaction fixed pension allowance and rising pensions so it may be that you get a little more every year pay taxes must - but it doesn't have to be that way.

What is the tax rate for pensioners?

Pensions are considered income in Germany, which is why the so-called here as well progressive taxation engages. That means: the tax rate rises with the income.

Income - including pensions - up to the amount of the tax-free amount of 9,408 euros do not have to be taxed for the assessment year 2020, the so-calledMarginal tax rate here is zero percent. From the first euro above that, the next marginal tax rate applies, namely 14 percent. Every euro that is above the next income limit is charged with the next higher tax rate.

Since this taxation system does not make it easy to calculate the exact amount of tax to be paid, you can Pension calculator from the Internet. With these you have to indicate how much your Annual gross pension is when you first received your pension and for which year you want to calculate the tax amount.

Can I also deduct expenses from tax?

Yes. This is done with the help of a tax return. You must prepare this if the taxable portion of your pension is above the basic tax-free amount (see above).

You can read here what expenses you can deduct from tax and what you should consider when completing your tax return.

Are there only taxes on the statutory pension?

No, you don't only have to pay taxes on the statutory pension. Company pensions and private pensions are also subject to taxation.

Company pensionsare 100 percent subject to taxation. This means that, unlike the statutory pension, there is no tax-free portion.

Taxation of private pensions

The following applies in principle: contracts, which closed before 2005 are usually tax-free. However, there are exceptions to this, for example if you have not been paying into the insurance for at least five years when the pension is paid out. In this case, you would have to pay tax on the income from the pension.

If you have private pension insuranceCompleted after 2005 there are two different rules:

  1. If you use the saved capital as One-time payment received, and the contract runs for at least 12 years, becomes the so-called Half income method applied. This means: 50 percent of the income is tax-free, the remaining 50 percent is taxed according to the income tax rate or, in the case of investment income, within the withholding tax.
  2. If you have the pension as a so-called monthly annuity The following applies: The portion of the income that is taxed depends on the age at which you receive the first payment from the private pension. Enclosed you will find an overview of the amount of the earnings share for each age.

Notice: If you terminate the private pension insurance policies that you took out after 2005, you will usually also have to pay taxes on the amount paid out. In most cases, however, it is not worth terminating a private pension insurance anyway. Read here what other options you have instead.

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