Tax-Free Pension Limits for Retirees in Germany: 2024 and Beyond
Determining tax-exempt pension amount - Eligible pension amount evading tax duties
Written by Nadine Oberhuber | Approx. 2 Mins Read
Each year, the Ministry of Finance sets a tax-free pension limit for new retirees. In 2024, this limit stands at a gross annual pension of €16,243 for singles, with double that amount for couples. This figure is subject to change annually, as a gradual adjustment of pension taxation has been in place since 2005.
New retirees in 2024 can receive up to 1,323 euros a month pension tax-free. When considering their tax-free status, their monthly income is subject to an 83% taxable portion. This means only 13,481 euros of their retirement income will be liable for taxation, and they can avail of tax deductions such as a flat rate for advertising costs, special expenses allowance, and pension provisions.
Who Must File a Tax Return?
Advocating more fairness in retirement savings, the regulation places emphasis on younger individuals contributing from their non-taxed income towards their retirement savings. The payouts from such contracts will be taxed as long as an individual has a pension income exceeding €11,604 in the previous year. This rule is applicable across all ages of retirement and will be €12,084 for 2025.
Retirees with additional costs or deductible expenses can still remain tax-free with a higher combined income. However, this will be subject to review on a case-by-case basis by the tax office.
A Look at Pension Taxation
In comparison to other European countries, Germany boasts relatively lenient pension taxes, particularly through tax deductible contributions and lower tax rates on benefits. However, new retirees can expect a growing tax burden on their pension income over time. The taxable portion of their pensions will gradually increase each year until it reaches 100% by 2040.
Special Considerations for Foreign Pension Plans
A significant revision has taken place for foreign pension plans, such as US pension plans. These payouts will now undergo more comprehensive taxation in Germany starting from 2025, removing some previous tax advantages.
While pension taxation may present challenges, the benefits of retirement savings remain a crucial aspect for future financial security. Contributions to schemes like the base pension will continue to offer substantial tax deductions, with investment gains tax-deferred until retirement. The potential introduction of a tax-free "active pension" should also contribute to a more comfortable retirement for many.
- Tax
- Pension Taxation
- BMF
- The tax-free limit for new retirees in 2024, set by the Ministry of Finance, is a gross annual pension of €16,243 for singles, with €32,486 for couples, but this figure is subject to annual adjustments.
- For singles, the tax-free limit implies that they can receive up to 1,323 euros a month tax-free, with an 83% taxable portion on their monthly income above this limit, making only 13,481 euros of their retirement income liable for taxation.
- In 2025, individuals with a pension income exceeding €12,084 in the previous year will be required to file a tax return, regardless of their retirement age, as the regulation aims to make retirement savings fairer for younger individuals.
- By 2040, the taxable portion of retirees' pensions in Germany is expected to reach 100%, in contrast to other European countries that offer lenient pension taxes through tax-deductible contributions and lower tax rates on benefits.
