As of: March 27, 2024, 6:05 a.m
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The Growth Opportunities Act reduces the tax liability of pensioners.
Your tax rate increases more slowly.
Larger parts of additional income now remain tax-free.
Berlin - Last week, the Berlin Traffic Light Government's Growth Opportunities Act passed the Federal Council's Mediation Committee.
This could bring billions in relief to the economy.
Pensioners will also benefit noticeably, explains Germany's largest wage tax assistance association, United Wage Tax Assistance (VLH).
There are two new regulations that affect new pensioners: the taxation portion of pensions and the age relief amount.
“The slower increasing tax share that has been decided is of course positive for pensioners,” says VLH boss Jörg Strötzel about the main effect.
The Taxpayers' Association and its experts have also looked at the new regulations.
What does the Growth Opportunities Act mean for the taxation portion of pensions?
From 2023 onwards it will rise more slowly than previously planned, meaning that the full taxation of pensions will be pushed back by 18 years.
Originally, the taxable pension portion was supposed to grow by one percentage point annually.
According to the old regulation, the entire pension would have become taxable upon retirement from 2040.
Now the taxable share increases by only half a percentage point per year.
The whole thing applies retroactively to 2023.
Anyone who became a pensioner last year and has to submit a tax return for pensioners this year only needs to count 82.5 instead of 83.0 percent of their pension towards any tax liability.
For new retirees this year it is 83.0 instead of 84.0 percent.
Pensions will only become fully taxable when you retire in 2058.
This is primarily not a tax increase, but rather a transitional regulation introduced in 2005: For each age group, an ever-increasing portion of the pension becomes taxable, but an increasing proportion of the pension insurance contributions paid becomes tax-deductible.
How much does this bring to an average pensioner over his statistically expected pension benefit period?
All experts are unable to quantify this seriously.
Pensions are too individual and dependent on too many potentially relieving factors.
Based on the changes adopted, individual experts have calculated minimum amounts of barely over 1,000 euros to a good 10,000 euros over the entire pension term.
In general, those born between 1975 and 1980 may experience the greatest reduction in tax liability.
And what about the retirement allowance?
This is also falling less quickly with the current new regulation, from 0.8 to 0.4 percent annually.
Retirees who are at least 64 years old and receive additional income in the form of capital gains, rent or wages in addition to their pension receive a larger share of this tax-free.
For 2023, the tax-free portion of such income is now 14 percent, and for 2024 it is 13.6 percent.
However, there are maximum limits that amount to 665 euros for last year and 646 euros for this year.
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Many pensioners have more money in their pockets thanks to the Growth Opportunities Act: full taxation is postponed for 18 years, and the tax burden falls on the economy.
© Stefan Sauer/dpa
Why has the traffic light government now relieved pensioners?
This is primarily due to the case law of the Federal Finance Court (BFH) on double taxation.
Accordingly, if the regulations remain unchanged, German citizens could have to pay taxes both on their pension contributions during their working lives and on their pension benefits as retirees.
According to the BFH, such double taxation is not permitted.
Is the issue of double taxation now settled?
No, says the Taxpayers' Association.
The current new regulation is only a second of three necessary steps.
The first was an increase in the special spending amount for pensioners last year.
The third step that is still missing concerns pension increases.
This is because the percentage of the pension that has to be taxed remains the same once you retire for the entire duration of the pension.
However, pension increases, which usually occur annually, are still excluded from this.
This increase is currently generally offset at 100 percent towards any tax liability.
The Taxpayers' Association, among others, is also demanding allowances for them.
A discussion about this is also expected this year, so that the tax liability of retirees will be further reduced.
When do pensioners even have to pay taxes?
This depends on your total income.
On the one hand, this is the tax-relevant part of your pension payments, which is now reduced.
There are also company pensions, pensions, interest, dividends, renting and leasing.
Only if the sum of all of this exceeds 10,908 euros for single people in 2023 or 11,604 euros for this year does the surplus share have to be taxed.
For married people, this limit income is 21,816 euros for last year and 23,208 euros for this year.