Pension and taxes: How much pension is tax-free and when do pensioners have to pay taxes?

Pension and taxes: How much pension is tax-free and when do pensioners have to pay taxes?

According to a report by www.t-online.de, explains how much pension can be withdrawn tax-free and what factors play a role. There are differences between singles and married couples.

The basic allowance for single people is 10,908 euros (2024: 11,784 euros). This means that pension income is tax-free up to this amount. The excess amount will be taxed. Married couples have a double basic allowance of 21,816 euros (2024: 23,568 euros). The taxable pension is calculated based on the pension allowance, which decreases annually and will no longer apply from 2040.

An example illustrates the calculation: A single pensioner with an annual gross pension of 12,000 euros has a pension allowance of 2,040 euros. The taxable pension is therefore 9,960 euros. When he retires in 2023, he would have to receive at least 13,140 euros in pension in order to exceed the tax-free limit.

As a financial professional, it is important to emphasize that retirees should check their tax liability and file a tax return if necessary. Other income such as rental income or capital gains may also be taxable. In order to minimize the tax burden, it is advisable to seek tax advice well before retirement and to use tax-privileged investment products.

With ongoing demographic change and the increasing number of retirees, the tax burden in retirement could become an important issue in the financial industry. Investments in tax-optimized pension products and tax optimization could become more important.