Tax-Free Pensions: How Much Can You Stash Away sans Taxes?
- Authored by Nadine O'B
- Est. Reading Time: + - 2 Min
The question explores the maximum pension amount that wouldn't require tax payments. - A query concerning the potential pension amount that could be received without the necessity of tax payments.
The German Finance Ministry sets the tax-free pension amount annually. For retirees starting in 2025, they can receive up to 16,500 euros in annual gross pension without shelling out taxes on it, applicable for singles. For couples, it doubles but decreases each year due to the gradual adjustment of pension taxation since 2005[1]. Old-timers who retired in 2005 could enjoy a tax-free pension as high as 19,758 euros.
The idea behind this gradual adjustment is to create a slightly fairer retirement savings landscape and motivate younger individuals to save privately. Contributions to retirement are initially untaxed; however, only retirement plan payouts are taxed. The reasoning is that lower tax rates for pensioners ensure a small tax advantage for savers[2].
So, who needs to file a tax return? It's anyone with over 12,084 euros in pension income from the preceding year 2024, regardless of the retirement date, generally speaking. This tax-free allowance increased from 11,604 euros in 2024 to 12,084 euros in 2025[2]. This translates into roughly 1,000 euros in monthly pension before taxes, given no other deductions. However, pensioners might have advertising costs, special expenses, or extraordinary burdens, which could potentially make their total income surpass this allowance and still remain tax-free[2].
The Ministry of Finance's math: In 2025, a new retiree can receive a tax-free pension of 16,500 euros annually, equivalent to 1,375 euros per month. With a taxable rate of 83%, only 11,447.25 euros of this 16,500 euros are subject to taxation. After deducting the advertising cost allowance (102 euros), special expenses allowance (36 euros), and precautionary expenses (up to 1,739 euros), the taxable amount becomes 11,604 euros[1][2].
Veterans who started receiving pension in 2005 can still receive up to 50% of their pension income tax-free, equating to a maximum of 19,758 euros, or 1,610 euros per month[1].
- Pension taxation
- Taxes
- BMF
- Retirement savings
- The gradual adjustment in pension taxation, initiated in 2005, aims to create a fairer retirement savings landscape and encourage younger individuals to save privately, as part of the community and employment policies.
- In personal-finance planning, it's essential to consider the impact of taxes on pension income, especially in light of the Finance Ministry's annual tax-free pension amount limit, as this can significantly affect one's overall financial situation.
