Taxes for a pension of 1,600 euros: allowances and income tax

Taxes for a pension of 1,600 euros: allowances and income tax

According to a report by www.infranken.de, Pensioners are also subject to tax in Germany. Whether taxes ultimately have to be paid depends on the amount of pension benefits. Here you can read how much of a monthly gross pension of 1,600 euros is really lost.

1600 euro pension – how many taxes are due? Pension allowance and basic allowance are crucial

In order to calculate the amount of taxes that you pay on a gross monthly amount of 1,600 euros, you first need to know which allowances apply to you. On the one hand, there is the basic tax allowance that all taxpayers are entitled to, and there is also the pension allowance for pensioners.

How high this is must be checked individually, as the value depends on the year in which you retire. However, it is expected to fall to zero by 2040. If you then retire, you will have to pay tax on the entire pension in the future.

If you retire by then, you will still benefit from the allowances. You only have to pay income tax if you, as a pensioner, exceed the amount in total, i.e. the entire taxable pension portion. This then applies to the part that is above the basic allowance.

Basic tax allowance for pensions: This applies to single people and married couples

The basic tax allowance increases a little every year; for 2022 this was subsequently increased to 10,347 euros. For married couples, however, the amount is double, this year 20,694 euros. In 2021 the value was 9,744 or 19,488 euros and in 2020 it was 9,408 or 18,816 euros. According to a ruling by the Federal Finance Court, the federal government must reform the tax formula for pensions in order to avoid so-called double taxation.

Part of the reform should then be that the pension will only be 100 percent taxable from 2060, i.e. 20 years later. The allowance should then fall more slowly.

The tax rate increases with the amount of pension payments. Every euro that is above the next income limit is charged at the next higher tax rate. This principle is called progressive taxation.

Pension of 1,600 euros: A calculation example – this is how much you would have to pay for the year 2023

But what does that mean for a pension of 1,600 euros per month? Assume you retired in 2020, are single, not in church, have statutory health insurance and live in Schweinfurt. Then you currently have a pension allowance of 20 percent. In our example, 80 percent of the pension is taxable. If you receive a pension of 1,600 euros per month, that's 19,200 euros per year. 20 percent of this is 3,840 euros, which remains tax-free. Of the 19,200 euros, 15,360 euros must be taxed. Only the statutory health and nursing care insurance contributions are deducted from this sum before tax, a total of 10.95 percent. The basis for calculation is the full annual pension of 19,200 euros. This results in an annual contribution amount of 2,102 euros, so the taxable pension portion drops to 13,258 euros. This sum is now adjusted for the flat rate for income-related expenses for pensioners of 102 euros and the flat rate for special expenses of 36 euros. The final taxable share is 13,120 euros.

How much tax has to be paid can be found in the basic income tax table. For 2020 that would be 653 euros.

Conclusion: Calculating taxes for pensions is complex - personal pension advice makes sense

General statements cannot be made as to how high your tax burden will be. However, since the tax burden increases year after year, it may even be worthwhile to retire earlier. Personal pension advice can help with this.