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Pensioners have to check every year whether an annual statement from the tax office is necessary because pensions increase (almost) every year.
An overview.
Munich - Every year more pensioners are liable to pay taxes - and there is great uncertainty as to when the tax authorities will strike.
The tz explains under which circumstances pensioners have to pay taxes.
Which pensioners are subject to tax?
Pensioners are obliged to submit an income tax return every year if their taxable income exceeds the annual basic allowance.
Income includes all pension income as well as income from company pensions and pensions, interest and dividends, renting and leasing.
The basic tax allowance for 2023 is 10,908 euros for single people and 11,604 euros for 2024.
For married people, this allowance doubles, i.e. 21,816 or 23,208 euros.
But: Depending on when your pension begins, part of the statutory pension remains tax-free!
Every year more and more pensioners are liable to pay taxes.
(Archive image) © picture alliance/dpa, Lino Mirgeler
Why are more and more pensioners becoming liable to pay taxes?
Less remains tax-free for each new retirement cohort.
By 2040, 100% taxation of “new pensions” should be achieved.
For everyone who became a pensioner by 2005, 50 percent of the 2005 pension is tax-free; in the following years, the percentage of the taxable pension portion rose or continues to rise.
For new retirees born in 2023, the taxable portion of their retirement benefits is 83 percent, which means 17 percent of the pension is tax-free.
For new retirees in 2024, the taxable portion increases to 84 percent (16 percent tax-free).
But that could still change, because the Mediation Committee in Berlin is currently discussing the “Growth Opportunities Act”, which should actually have been finalized in November 2023.
Among other things, this law plans to postpone 100% taxation until 2058.
This would mean that for new retirees born in 2023, the taxable portion of their retirement benefits would be 82.5 percent (17.5 percent of the pension is tax-free) and for new retirees born in 2024, the taxable portion would rise to 83 percent (17 percent tax-free).
The Growth Opportunities Act is expected to be passed in February 2024.
How are pension increases taxed?
Because pensions increase (almost) every year, you have to check every year whether an annual statement from the tax office is necessary.
The annual pension increase is 100 percent taxable; there is no tax-free portion.
It can happen that even if you are a pensioner who was previously exempt from tax, you become liable to pay taxes.
The fact that a certain part of the pension is “taxable” does not mean that pension recipients actually have to pay taxes on their pension, but only provides information about which part of the pension is included in the calculation of the relevant taxable income.
This value alone ultimately decides whether and to what extent taxes have to be paid.
How do I calculate the taxable portion of the pension?
The new pensioner with a taxable pension share of 83 percent must deduct 17 percent from his gross pension amount for 2023.
He must add his other income (company pension, rental income, etc.) to the amount calculated in this way.
From this he then deducts his contributions to health and nursing care insurance and the special expenses flat rate of 36 euros (72 euros for married people).
If the result is below the basic allowance of 10,908 euros (21,816 for married people), the pensioner does not have to pay taxes.
How high the gross pension was is stated in the “notification for submission to the tax office”.
When and how do you get a non-assessment certificate?
If it is to be expected that you will not be assessed for income tax because your total income is below the basic allowance (single person: 10,908 euros; couples: 21,816 euros), you can be exempt from the obligation to submit a tax return by issuing a non-assessment certificate.
In addition, pensioners who are not subject to tax liability or tax assessment can save capital gains tax (withholding tax) by presenting this certificate.
This means that interest and dividends are paid out gross without any tax being withheld.
You can apply for the non-assessment certificate from the tax office; it is valid for a period of three years.
What happened to the court cases regarding double taxation of pensions?
There were two model lawsuits before the Federal Finance Court, which dealt with taxation during the transition phase and the question of whether this would lead to double taxation.
The judgments were published at the end of May 2021: The BFH continues to consider the transitional regulation itself to be constitutional.
Both plaintiffs then filed a constitutional complaint with the Federal Constitutional Court (case numbers 2 BvR 1143/21 and 2 BvR1140/21).
Unfortunately, the Federal Constitutional Court did not accept the proceedings for decision on November 7, 2023.
This means: The current regulation remains in effect.
Author: M. BACKHAUS