With the annual pension adjustment, some pensioners suddenly slip into tax liability. A table shows you whether this also applies to you this year.
There is a point in the year when it is decided whether pensioners will have to deal with the tax office or not: July 1st. Because then the pension payments are regularly increased – and in some cases this means that pensioners suddenly become taxpayers.
In 2023, statutory pensions will increase by 4.39 percent in the West and by 5.86 percent in the East. Unlike when you retire, where a certain portion of your pension remains tax-free, every pension increase is 100 percent taxable. Therefore, in a few years, it may happen that pensioners have to pay taxes at all or more than before because of the increase alone.
Which pensioners slip into tax liability
“Because the basic allowance was increased more than usual this year, pensioners should no longer be subject to tax solely because of the pension increase,” says Jana Bauer, deputy managing director of the Federal Association of Income Tax Assistance Associations (BVL), t-online. “Basically, however, pensioners should be careful if their personal circumstances have changed, for example because their partner has died, or if additional income is added, for example from renting and leasing or capital assets.”
You only have to submit a tax return if your taxable part of your pension is above the basic tax-free allowance of EUR 10,908 per year. Whether or not taxes are actually due depends on the amount of expenses and lump sums you can claim – for example due to a disability or high medical expenses.
Table shows tax-free gross annual pension for 2023
The FSVO has calculated when pensioners who only receive the statutory pension will be subject to tax. For example, anyone who retired in 2023 and only receives a maximum statutory gross pension of 15,374 euros that year does not have to submit a tax return or pay taxes. Depending on the year in which the pension begins, higher amounts are tax-free for older cohorts. For old pensioners in the west (entry before 2005) it is still more than 20,700 euros.
You can see what applies to you in the table below. Double the amounts apply to married couples and registered civil partners who file a joint tax return.
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“The table shows the amount up to which the pension remains tax-free,” says Bauer. Whether taxes are due on pensions and other old-age benefits depends on the start of the pension and the amount of the gross pension. “It may also be the case that you don’t have to pay any taxes if you exceed the amounts because, for example, you can claim a lump sum for the disabled or other high, extraordinary tax-reducing expenses.”
Tax Liability: Retirees are no exception
In any case, you must submit a tax return as soon as you exceed the amounts listed above. Especially those who were in tax class 1 at work and never submitted a tax return because they didn’t have to, are sometimes surprised to receive mail from the tax office after retirement.
“As soon as these people retire, they are obliged to submit a tax return, because unlike with wages, taxes on the pension do not automatically flow to the tax office every month,” explains Bauer. There is therefore no avoiding the first tax return after retirement. “If the tax office determines that you do not have to pay taxes due to lump sums or other high expenses, you can be exempted from the obligation to pay taxes for future years.” Read here what pensioners can deduct from their taxes.
