How is the mother's pension taxed?
The so-called mothers' pension is a pension increase due to extended child-rearing periods for children born before 1992.
It has been granted since July 2014 and currently amounts to up to 2,5 earnings points per child.
Mothers' pension and tax law
For tax purposes, the mothers' pension is not considered a regular pension adjustment but an extraordinary re-determination. Therefore, the pension allowance is recalculated based on the start of the pension and the pension values in the following year.
Example:
A pensioner who retired in 2007 receives an additional 28,61 Euro per month (West) for one child from July 2014. For the year 2014, this amounts to 171,66 Euro (6 × 28,61 Euro). The taxable portion is 54%, the tax-free portion is 46%. The increase in the pension allowance is calculated based on the average pension value in 2008 (26,42 Euro). This results in an additional pension allowance of 72,92 Euro (6 × 26,42 Euro × 46%).
Previously, the allowance was simply calculated from the additional pension amount. Today, the calculation is more differentiated, which often leads to a lower tax-free amount.
Mothers' pension from 2019
Since 01.01.2019, the child-rearing period for children born before 1992 has been extended again – from 24 to 30 months. This increases the entitlement to 2,5 earnings points per child.
Regulations:
- Pension start from 01.01.2019: Automatic increase by 0,5 earnings points.
- Existing pensions: Surcharge of 0,5 earnings points from January 2019.
- Pensioners who had no entitlement in 2014 can now be considered.
- In special cases (e.g. adoption, return from abroad), there is a right to apply (§ 307d para. 5 SGB VI).
An application is generally not required, the adjustment is made automatically by the pension insurance.
BFH ruling on recalculation (X R 24/20)
The Federal Fiscal Court ruled that a new calculation of the pension allowance is required for pension increases due to the mothers' pension. The mothers' pension is retroactively taken into account from the start of the pension, based on the pension values at that time.
The tax offices are now implementing this calculation method. If the pension allowance still seems too low, it is advisable to consult the relevant tax office.
Conclusion
The tax treatment of the mothers' pension is complex but can affect the taxable portion of the pension. A correct calculation of the pension allowance is crucial. Affected pensioners should carefully check their tax assessments.
