Pensioners and taxes: What is important when it comes to pension taxation - financial expert explains

Pensioners and taxes: What is important when it comes to pension taxation - financial expert explains

According to a report by www.tz.de,

Pensioners have to check every year whether an annual statement from the tax office is necessary because pensions increase (almost) every year. An overview.

More and more pensioners are currently becoming liable to pay taxes, and the uncertainty about when the tax authorities will strike is growing. Pensioners must submit an income tax return if their taxable income exceeds the annual basic allowance. This basic allowance increases every year: for 2023 it was 10,908 euros for single people and for 2024 it was 11,604 euros. If you are married, this allowance doubles.

Pensioners who will retire from 2023 will have to pay tax on 83 percent of their retirement benefits, while pensioners from 2024 will have to pay tax on 84 percent. However, the so-called “Growth Opportunities Act” is being discussed, which plans to postpone 100% taxation until 2058. This law is expected to be passed in February 2024.

The annual pension increase is 100 percent taxable, and pension recipients must check every year whether a statement is required. Pension increases are not taxed on a staggered basis, but rather the entire increase is taxable at 100 percent.

If it is to be expected that a pensioner will not be assessed for income tax because his total income is below the basic allowance, he can be exempted from the obligation to submit a tax return by issuing a non-assessment certificate.

Unfortunately, the model lawsuits before the Federal Finance Court on the subject of double taxation of pensions have not brought about any changes, and the current regulation remains in place.

These developments may have a significant impact on the financial market, particularly for retirees and the financial industry in general. As more and more retirees become tax liable, the demand for tax-optimized investment products and financial advice for retirees is increasing. This could potentially lead to new business opportunities for financial professionals, particularly in the area of ​​retirement planning and tax-optimized financial planning for seniors. In addition, the planned change in the law for 100% taxation by 2058 may lead to changes in pension policy and investment strategy for pensioners.

It is important that financial professionals and advisors prepare for these changes in order to provide their clients with the best possible advice and support, particularly regarding tax implications and retirement planning.