How to tax your pension income with SteuerGo

Many retirees are unsure whether and to what extent they need to declare their pensions in the tax return. In most cases, it is mandatory. The decisive factors are the year of retirement, the amount of income, and the applicable allowances. With SteuerGo, you can enter your pension income step by step and also take advantage of possible tax benefits.

How to enter pensions in SteuerGo

After starting the tax interview, select the item “Income from pensions”. First, enter the pension provider (e.g. Deutsche Rentenversicherung, pension fund, life insurance) and the individual amounts. The programme will guide you automatically through the input screens. You can also enter expenses directly related to the pension – such as tax consultancy costs. These are considered as income-related expenses and reduce the tax burden.

Which pensions are taxable?

In principle, most types of pensions are taxable. These include:

• statutory retirement pensions,
• disability pensions,
• widows', widowers' and orphans' pensions,
• company pensions from direct insurance or pension schemes,
• pensions from private pension or life insurance.

Only a few special pensions are tax-free, for example:

• accident pensions from the employers' liability insurance association,
• war pensions,
• severe disability pensions,
• certain compensation pensions.

In SteuerGo, select the applicable type of pension in the tax interview. This automatically ensures the correct tax treatment.

Basic allowance 2024

Whether a tax return is required depends mainly on the amount of income. The basic allowance was retroactively increased for 2024 and is 11,784 Euro for single persons and 23,568 Euro for married couples. If your income – i.e. pension, rental income, capital gains or other income – is below this threshold, no income tax is due. SteuerGo checks in the background whether your income exceeds the allowance and immediately indicates whether a tax liability arises.

Taxable portion of the pension

Not the entire gross pension is taxable, but only the so-called taxable portion. This depends on the year of retirement. Those who retired in 2005 or earlier pay tax on 50% of their pension. Since then, the percentage has increased each year. For new retirees in 2024, the taxable portion is already 84%. The remaining 16% remain tax-free as an allowance for life. From 2040, new retirees will have to pay tax on their entire pension.

Example of pension taxation

Mr Mustermann retires in 2024 and receives an annual pension of 18,000 Euro. Of this, 84% is taxable, i.e. 15,120 Euro. The remaining 2,880 Euro remain tax-free for life. As Mr Mustermann's income of 15,120 Euro exceeds the basic allowance of 11,784 Euro, he must submit a tax return. SteuerGo automatically calculates the taxable portion and correctly applies the allowance. If Mr Mustermann were married and his wife had no income of her own, the couple would be below the basic allowance of 23,568 Euro – in this case, there would be no tax liability.

Income-related expenses for pension income

For pension income, the tax office automatically takes into account an income-related expense allowance of 102 Euro per year. Higher income-related expenses can only be claimed if they can be proven to exceed the allowance and are directly related to the pension income. These include, for example:

• tax consultancy costs for preparing the tax return,
• proportional account management fees for a pension account (usually only a few Euro in practice),
• costs for tax-relevant specialist literature or tax software,
• postage or travel costs related to pension taxation.

SteuerGo also supports you here: The programme automatically takes the allowance into account and specifically asks if you want to enter higher expenses.

Conclusion

Pensions must be included in the tax return in most cases. The decisive factors are the year of retirement, the taxable portion of the pension and the applicable allowances. Those who retire in 2024 must already pay tax on 84% of their pensions in the tax return. Nevertheless, there are opportunities to reduce the tax burden through allowances and deductible costs. With SteuerGo, you not only enter your data conveniently, but also benefit from automatic checking and calculation of the tax burden!

How to tax your pension income with SteuerGo