Why nearly 200,000 pensioners in Germany don't have to pay taxes

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Why nearly 200,000 pensioners in Germany don't have to pay taxes
A pile of coins with the word "pensions" in German behind it. Photo: picture alliance / dpa | Andreas Gebert

Income tax is also due on pensions in Germany. But some pensioners who still had to pay taxes on their last returns are exempt this year. Why is that?


Around 195,000 pensioners will no longer have to pay taxes this year, according to a response from the Germany's Finance Ministry to a question from the Left Party, which was obtained by Redaktionsnetzwerk Deutschland (RND). 

The reason for this is that Germany's basic tax-free allowance, to which every taxpayer is entitled, increased from €10,347 in 2022 to €10,908 this year.

At the same time, however, 87,000 pensioners will become taxpayers in 2023 as they're set to receive 3.53 percent (western Germany) or 4.25 percent (east Germany) more pension from July. 

Put together, this means that around 5.9 million pensioners would be liable for taxes in 2023.


Over one million eastern Germans affected

The east German representative of the Left Party in the Bundestag, Sören Pellmann, considered it "good news that more than 100,000 pensioners will be exempt from tax liability this year." 

But he called pension taxation in general still "a major irritant."

"More than a million east Germans are affected," Pellmann said about the region where most Left Party voters are based. For many, he said, the taxation is incomprehensible. 

Germany's coalition government must "finally consistently protect small and medium-sized pensions from the tax office," he said. 

"The increase in the basic tax-free amount by 6.3 percent is not enough, if only because of inflation." 

Pellmann instead called for "a major tax reform for pensioners and an increase in the basic tax-free amount to at least €14,400."

When you have to pay taxes as a pensioner

To check whether you are liable to pay tax as a pensioner, you need to determine the taxable part of your pension. This depends on the year in which you retire: the later you stop working, the larger the portion of your pension you will have to pay taxes on will be.

If you retire in 2023, you will have a pension allowance of 17 percent; in return, the taxable portion will be 83 percent. You will then not have to pay tax on the amount corresponding to this percentage pension allowance for the rest of your life. 

READ ALSO: Why taxes on pensioners have risen up to 500 percent since 2010

Those who retire in 2040 will then have to pay tax on 100 percent of their pension income. However, the coalition government plans to stretch the period to 2060.

If your taxable portion of pension income exceeds the basic tax-free amount, you will also have to file a tax return as a pensioner.

READ ALSO: Pensions in Germany: How the new government plans to solve an age-old issue


pensioners - (der) Rentner

basic tax-free allowance - (der) Grundfreibetrag

liable for paying taxes - steuerpflichtig

irritant/annoyance - (das) Ärgernis

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