How is my pension from an agricultural pension fund taxed?
Taxation of Pension from an Agricultural Pension Fund
The pension from agricultural pension funds is taxed similarly to the state pension. Here are the key points:
Taxable Portion
Taxation is based on the taxable portion, which depends on the start date of the pension. This portion increases gradually. For pensions starting from 2025, it is 83,5% and rises annually to 100% by 2058 (§ 22 No. 1. a) aa) EStG, amended by the "Growth Opportunities Act").
Pension Allowance
In the second year of retirement, the tax-free portion of the pension is set as the pension allowance. This remains unchanged for life.
Taxation from the Third Year
From the third year, the pension is taxed after deducting the pension allowance and a standard allowance for income-related expenses of 102 Euro. Pension increases are fully taxable.
Income-Related Expenses
The tax office automatically considers 102 Euro as income-related expenses. You can claim higher expenses, such as for tax advice or pension advice, but you must provide proof.
Note: The pension allowance remains the same for life. Therefore, pension increases must be fully taxed.
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 is 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 need to submit a tax return.
