What is Wohn-Riester and how is it taxed?
The Home Pension Act came into force on 1 January 2008. With the home pension, state bonuses and personal savings contributions are used to finance the construction of a house, purchase a flat, or pay off a residential property. This is provided it is an owner-occupied property. You can receive the funding as soon as you are entitled to Riester funding. Anyone who is compulsorily insured in the statutory pension scheme or a civil servant is entitled to state funding through a Riester contract.
Complicated taxation
However, deferred taxation is applied to the home pension. The contributions remain tax-free; only the pension itself must be taxed - at your personal tax rate. And this is where it gets a bit complicated with the home Riester: The contributions and bonuses are to be recorded on an imaginary "housing subsidy account" with assumed interest of two per cent. However, you cannot access the account, as the funds recorded there are invested in property funding and, in principle, no longer exist. At the beginning of the "payout phase", when other "conventional" Riester savers receive their pension and have to declare it as income, the home Riester saver also receives a notice of their tax liability that has accumulated on the imaginary account over the years.
The home pensioner then has a choice: Tax everything at once: As a reward, they receive a 30 per cent discount. Or gradual taxation: Here, they can pay off their tax liability in instalments over a period of up to 23 years, like anyone receiving a regular Riester pension. Here too, the tax rate depends on the pensioner's total income.
Another sticking point: If you chose the one-off taxation, the following applies:
If you cease to use the residential property yourself within 20 years of the start of the pension phase, the remaining amount of the 30% dissolution amount must also be taxed as "other income" at the individual tax rate. But beware: The remainder of the 30% dissolution amount is to be taxed
- at one and a half times the amount if the tax-damaging event occurs in the first 10 years after the start of the pension phase (understand this penalty taxation if you can!),
- at the full amount if the tax-damaging event occurs between the 10th and 20th year after the start of the pension phase. The period after ceasing self-use is not decisive.
