Pension: How much tax is paid at 1,200 euros depends on when you retire

Anyone who receives a pension of 1,200 euros a month only has to pay taxes on it in exceptional cases.

Here it depends on the year of entry.

When did you retire and how much is your pension?

The answers to these two questions determine whether pensioners have to pay taxes.

This becomes clear with an exemplary monthly pension of 1,200 euros gross.

By the way: How much pension you get on average also depends on where you live.

Pension: How high are the taxes?

In order to calculate the tax, you first need to know how high the pension allowance is that applies to the pensioner.

This comes with the basic tax allowance that all taxpayers receive.

Important here: The pension allowance is a percentage, not an absolute sum.

The percentage that remains after deduction is the part of the pension on which tax must be paid.

Pension myth: The pension comes automatically - nine myths that circulate about the salary in retirement

Pension myth: The pension comes automatically - nine myths that circulate about the salary in retirement

The pension allowance is shrinking

With every year that pensioners retire later, the pension allowance shrinks.

As it stands, that would mean it's down to zero by the time you retire in 2040.

From this point on, new pensioners would then have to pay tax on their pension in full - if it weren't for the basic allowance:

Income tax only has to be paid if the taxable portion of your pension is above the basic allowance.

And only on the amount that is above that.

Pension: income tax and marginal tax rate

Income tax is due if the taxable portion of the pension is above the basic allowance.

The so-called marginal tax rate (14 percent) takes effect from the first euro – but it doesn’t stop there.

The higher the tax rate, the higher your own pension payments are.

Every euro that is above the next income limit is charged again at the next higher tax rate.

Our pension newsletter informs you every Wednesday about new developments relating to your pension.

Sign up now!

1,200 euros pension - a sample calculation

But what does all this mean for a pension of 1,200 euros?

Let's take Monika Mustermann for example.

She retired in 2020, left the church and is single.

Monika lives in Kaiserslautern and has statutory health insurance.

A pension allowance of 20 percent applies to them, so 80 percent of the pension must be taxed.

Important Information

In the course of retirement, every pension increase is fully taxable for you.

The pension allowance does not apply there.

Good: The basic allowance also increases, so the effects are minimal.

Monika Mustermann receives a pension of EUR 14,400 per year (EUR 1,200/month), of which EUR 11,520 is taxable in 2020 (80 percent of EUR 14,400).

The remaining 20 percent are tax-free: 2,880 euros.

In 2021 there was no pension increase in the West, for this reason the tax allowance remains at 2,880 euros, otherwise the higher pension would have been the basis for the pension allowance.

Deduction of health insurance and flat rates

From Monika's gross annual pension (before taxes) of 11,520 euros, the contributions to the statutory long-term care and health insurance are now deducted.

That's a total of 10.95 percent of the original 14,400 euros.

The result, here 1,577 euros, is deducted from the 11,520 euros.

Now only 9,943 euros are taxed.

+

Statutory health insurance and the special expenses allowance, for example, are deducted from the pension.

(icon picture)

© Ok Shu/Imago

The flat-rate income-related expenses (EUR 102 for pensioners) and the flat-rate fee for special expenses (EUR 36) are now deducted from this amount.

For Monika Mustermann, 9,805 euros of her pension are taxable in the end.

You can also find out how much tax has to be paid per year from the basic income tax table.

That would be for 2020: 57 euros.

Rubric list image: © Ok Shu/Imago