(2021)
What is the maximum amount for which I can deduct pension expenses?
Pension expenses (contributions to the state pension insurance, professional pension schemes, and Rürup pension insurance) are fully deductible up to a certain maximum amount. However, they actually only reduce tax by a certain percentage until 2025. This percentage changes annually, starting at 60% in 2005 and rising to 100% by 2025.
In 2021, pension contributions are fully deductible up to 25,787 Euro for single persons and 51,574 Euro for married couples. However, these contributions only reduce tax by 92%, i.e., up to a maximum of 23,724 Euro or 47,448 Euro.
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The Federal Fiscal Court considers the legal transitional regulations in connection with pension taxation and the deduction of pension expenses to be constitutional (BFH rulings of 19.05.2021, X R 33/19 and X R 20/21). However, it has pointed out that this does not apply to future pensioners. There could be a risk of double taxation.
The Federal Ministry of Finance has announced that the full deductibility of pension contributions during the working phase, planned for 2025, will be brought forward (as of 03.06.2021, source: BMF online). Therefore, it is possible that the above amounts will change slightly in the near future, meaning that the percentage-limited deduction of pension expenses will be increased. Further developments must be carefully monitored.
Other insurance expenses are deductible up to a total of 1,900 Euro if the taxpayer receives tax-free contributions to their health insurance or allowances for medical expenses. If they do not receive these tax-free contributions, they can claim up to 2,800 Euro as other insurance expenses. However, the contributions only reduce tax if the maximum amount of 1,900 Euro or 2,800 Euro has not already been used up with contributions to basic health and nursing care insurance.
If you pay lower contributions to basic health and nursing care insurance, you have a little leeway to deduct contributions for unemployment insurance, liability insurance, and other insurance.
The tax office always considers contributions to private and statutory basic health insurance and statutory nursing care insurance at their actual amount, even if they exceed the maximum amount of 1,900 Euro or 2,800 Euro. Only if these amounts are not used up with health and nursing care insurance contributions can other insurance contributions be deducted within the remaining leeway.
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