Pensioners in Germany: How to receive an energy relief payment
Your €300 payment may come with a tax catch. Here's what you need to know.
Come December, pensioners living in Germany will receive a €300 relief payment from the government to help alleviate rising heating and energy costs.
The payment itself will be automatically deposited into pensioner bank accounts through payments from their regular pension funds – with the aim of keeping payments as quick and unbureaucratic as possible.
But there may be tax implications later.
That’s because the €300 energy relief payment is taxable. If you already have income above the exempted amount in Germany and have to submit a tax return anyway, this €300 payment simply gets added to your taxable total. But if the payment pushes you above the exempted amount, you’ll have to file a tax return.
READ ALSO: Five last-minute tips for your German tax return
Will I have to file?
Unfortunately, that’s not an easy answer.
First, you have to determine which part of your pension is taxable.
That depends on what year you retired. For people who retired in 2005 or before, only 50 percent of their pension income is taxable. That increases two percent every year later. So someone who retired in 2006 will have to pay on 52 percent of their pension income, until the current year 2022. Retirees from this year have to pay tax on 82 percent of their pension income.
By 2040, 100 percent will be taxable – although the current government plans to extend this to 2060.
Once you’ve figured out the taxable portion of your pension income, add the €300 energy relief payment in full to that amount. Yes – in full – as no part of the €300 is tax-free. Once you add any other sources you may have on top of that, such as investments if you have any, and then deduct any credits, you’ll get your total taxable income.
In 2022, if that’s above the €10,347 basic allowance, you’ll need to file a tax return on whatever amount exceeds the basic allowance.
The current government has plans to raise this allowance in 2024 though, to apply to the 2023 tax year.
READ ALSO: German tax-free allowance ‘set to rise’ amid record-high inflation
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Come December, pensioners living in Germany will receive a €300 relief payment from the government to help alleviate rising heating and energy costs.
The payment itself will be automatically deposited into pensioner bank accounts through payments from their regular pension funds – with the aim of keeping payments as quick and unbureaucratic as possible.
But there may be tax implications later.
That’s because the €300 energy relief payment is taxable. If you already have income above the exempted amount in Germany and have to submit a tax return anyway, this €300 payment simply gets added to your taxable total. But if the payment pushes you above the exempted amount, you’ll have to file a tax return.
READ ALSO: Five last-minute tips for your German tax return
Will I have to file?
Unfortunately, that’s not an easy answer.
First, you have to determine which part of your pension is taxable.
That depends on what year you retired. For people who retired in 2005 or before, only 50 percent of their pension income is taxable. That increases two percent every year later. So someone who retired in 2006 will have to pay on 52 percent of their pension income, until the current year 2022. Retirees from this year have to pay tax on 82 percent of their pension income.
By 2040, 100 percent will be taxable – although the current government plans to extend this to 2060.
Once you’ve figured out the taxable portion of your pension income, add the €300 energy relief payment in full to that amount. Yes – in full – as no part of the €300 is tax-free. Once you add any other sources you may have on top of that, such as investments if you have any, and then deduct any credits, you’ll get your total taxable income.
In 2022, if that’s above the €10,347 basic allowance, you’ll need to file a tax return on whatever amount exceeds the basic allowance.
The current government has plans to raise this allowance in 2024 though, to apply to the 2023 tax year.
READ ALSO: German tax-free allowance ‘set to rise’ amid record-high inflation
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