The taxable portion of the pension depends on the year the pension begins. For pensions starting from 2025, it is 83,5%. This percentage increases annually by half a percentage point until it reaches the full 100% in 2058 (§ 22 No. 1. a) aa) EStG, amended by the "Growth Opportunities Act").
In the second year of receiving the pension, the remaining amount after deducting the taxable portion is set as the personal pension allowance. This amount remains unchanged and tax-free for life.
From the third year of receiving the pension, the pension is taxable after deducting the allowance and the standard allowance for income-related expenses of 102 Euro. Any pension increase is fully taxable.
The tax office automatically applies an allowance of 102 Euro. Higher expenses such as tax consultancy fees or pension advisory costs can be additionally claimed but must be proven.
Hans Müller retired in 2009 and receives a pension of 15.000 Euro in 2025. Of this, 3.000 Euro are pension increases added since 2009. His pension allowance, set in 2009, remains at 5.040 Euro. 58% of his original pension of 12.000 Euro, i.e. 6.960 Euro, is taxable.
Since the pension allowance remains unchanged, the 3.000 Euro pension increases are fully taxable. The taxable pension for 2025 is therefore:
- Taxable portion of the original pension: 6.960 Euro
- Plus pension increases: 3.000 Euro
In total, 9.960 Euro are taxable. As this is below the basic allowance of 12.096 Euro (2025), Hans Müller does not have to pay tax despite the pension increases.
If Hans Müller were to retire in 2025 and receive a pension of 15.000 Euro, 83,5% (12.525 Euro) would be taxable. In this case, he would have to submit a tax return.
