July is a good month for around 21 million pensioners. Pensions are rising faster than they have in decades. In the west by 5.35 percent, in the east by as much as 6.12 percent. And for some, there is another aspect this year: Although they get more money, tens of thousands of pensioners, unlike last year, do not have to hand over any of it to the tax authorities, they no longer have to pay taxes.
This is due to the increase in the basic allowance, which was decided in May retroactively to January 1, 2022. This is now 10,347 euros, previously it was 9984 euros. According to the Federal Ministry of Finance, the increase in the basic tax-free allowance by 6.19 percent means that “around 80,000 taxpayers who draw a pension are no longer subject to tax”.
This is because the pension increase this year is mathematically well below the increase in the basic allowance. Calculated for the year as a whole, i.e. for twelve and not just six months, the pension increase is finally 2.68 percent in the west and 3.06 percent in the east.
Basically, the tax burden of pensioners depends on when they retire. The later the retirement age, the higher the proportion. For example, if you retired in 2005, you will have to pay tax on 50 percent of your income for the rest of your life.
Anyone who reaches retirement age in 2020 will have to pay tax on 80 percent. For all those who will only join this year, it is 82 percent. From 2040, the monthly transfers from the pension fund will then have to be taxed in full. The contributions are then completely tax-free.
The percentages do not refer to the current pension, but to the one that was paid in the first year after retirement. The increases that have taken place since then are already 100 percent taxable. Anyone who retired in 2010, for example, has to pay tax on 60 percent and has a 40 percent pension allowance.
Assuming the pension at that time was 15,000 euros for the entire year, this results in a pension allowance of 6000 euros. These 6,000 euros remain fixed, even if the gross annual pension is now significantly higher.
In addition to this individual pension allowance, there is now the general basic allowance, which usually changes from year to year. Pension allowance and basic allowance are now added and deducted from the total pension – and if there is anything left over, this amount must be taxed.
Double the basic allowance applies to married couples who are assessed together, but the pension allowances are calculated individually. Couples therefore often remain tax-free because the woman often draws a significantly lower pension and both then remain below the exemption limit together.
The Bundesverband Lohnsteuerhilfevereine (BVL) calculated what this means in euros and put it in a table. It shows up to which pension amount a single pensioner does not have to fear any additional tax payments depending on the year in which the pension begins, provided that he has no further income. For example, anyone who first received a pension in the West in 2010 and has an annual gross pension of 18,124 euros in the current year will not have to pay any taxes in 2022.
In the East pension area, the limit is 17,222 euros. The monthly pension in the example after the upcoming increase in the second half of the year should not be more than 1550 euros (West) and 1478 euros (East). For all newcomers to pensions in 2020, anyone who receives a pension of no more than EUR 15,082 (West) and EUR 15,051 this year is tax-free.
Although this is no more than a first orientation for the answer to the question of whether you have to pay taxes or not. “When you’re at the border, that doesn’t automatically mean that you’re liable for tax,” says BVL tax expert Jana Bauer. Because like every employee, every pensioner can claim numerous expenses.
“For pensioners, these are typically extraordinary burdens such as medical expenses, costs for glasses and hearing aids,” says Bauer. In addition, depending on the individual case, a care allowance and a disability allowance could be applied. But other expenses, such as donations, expenses for domestic help and craft work, also had a tax-reducing effect.
On the other hand, additional income must not be lost sight of. “This affects many pensioners who have additional income in addition to the statutory pension, for example because they receive a widow’s or company pension, because they go to work in addition to the pension or because they have small or large rental income,” says the wage tax assistance association United income tax assistance (VLH) with. As a result, the taxable annual income can quickly exceed the basic allowance.
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