Are my pension payments taxable?
Pension payments (retirement pension, widow's pension, orphan's pension, maintenance contribution or similar payments) are income from employment according to the Income Tax Act (Einkommensteuergesetz) and are subject to the wage tax deduction procedure when paid.
In order to be able to calculate your individual wage tax and pay it to the tax office, the pension office in the Berlin State Administration Office (Landesverwaltungsamt Berlin) needs your personal wage tax deduction details (tax class, number of child allowances, church tax details, exemption or addition amounts and, if applicable, a factor for tax class IV), which were last certified for the year 2010 on a wage tax card or, if applicable, for the years 2011 and 2012 on a replacement certificate issued by the tax office at your place of residence.
Instead of the wage tax card, since 2013 the pension office can electronically obtain your wage tax deduction characteristics from a database of the tax authorities
using your tax identification number as well as your date of birth.
(E lektronische Lohn St euer A bzugs M erkmale – ELSTAM).
The taxation of pension payments is basically the same as that of service payments. The only difference is that an additional pension allowance is granted.
As of 01.01.2005, the taxation of pension income (pension benefits and pensions) has been newly regulated by the Retirement Income Act (Alterseinkünftegesetz - AltEinkG). The core element of the Retirement Income Act is the transition from taxation of the contributions paid into the pension provision during the employment phase ("upstream" taxation) to taxation of the benefits in the payout phase ("downstream" taxation). This will take place gradually in the transition period planned until 2040; after that, civil servants' pensions and retirement annuities will be treated equally for tax purposes.
The pension allowance granted to date will be reduced annually, i.e. the later the pension commencement date, the lower the allowance to be taken into account, until no pension allowance is due for a pension commencement date from 2040.
The previous employees' allowance of € 920 was also reduced to € 102 (as for pensioners); to compensate for this, a so-called supplement to the pension allowance was introduced, which, like the pension allowance, will be reduced annually until 2040.
The year in which the pension starts is decisive for the amount of the allowance to be granted (for life) and the supplement to the pension allowance. The relevant percentage, the maximum amount of the pension allowance and the supplement to the pension allowance result from the table mentioned in sect. 19 para. 2 of the Income Tax Act (EStG).
The pension allowance and the supplement to the pension allowance apply for the entire duration of the pension payment. Regular adjustments of the pension allowance do not lead to a recalculation.
However, a recalculation must be carried out if the pension benefit increases or decreases due to the application of crediting, suspension, increase or reduction regulations. In the calendar year in which the change is made, the highest pension allowance and supplement to the pension allowance shall be decisive.
