Pensions have been taxed downstream in Germany for over 20 years. But up to what amount will pensions be tax-free in 2026?
Pension and tax, this combination always causes confusion. Pensions have been taxed downstream for over 20 years. This means that contributions to pension insurance are tax-free, but the pension paid out will have to be taxed later.
But as a pensioner you’re alone here. Because, unlike the employer, the German Pension Insurance (DRV) does not withhold any taxes from the pension. The DRV automatically transmits the necessary pension data to the responsible tax office.
The tax office knows everything, but does not automatically ask pensioners to file a tax return immediately. It can take years before the authorities suddenly come up with additional demands.
The basic rule is: If the taxable portion of the pension exceeds the basic allowance, a tax return is necessary for pensioners. There is therefore an obligation that must be fulfilled without being asked to do so.
Take into account pension allowance
The first important information is that not all pensioners have to submit a tax return. A tax return is always necessary if the taxable income exceeds the annual basic allowance. In 2025 this was 12,096 euros for single people and 24,192 euros for married people. For 2026 it is 12,348 euros (single people) and 24,696 euros (married people).
But simply comparing the annual pension with the basic allowance, that’s not entirely true either. The reason: Currently, the entire pension does not have to be taxed; there is a pension allowance. However, this allowance decreases every year, so that from 2058 the entire pension will have to be taxed because the pension allowance has been deducted.
For 2025 there will be a pension allowance of 16.5 percent, in the tax year 2026 it will only be 16 percent and so things will continue to decline in 0.5 percent increments. However, when you join, you secure the allowance for life. This means that anyone who retires in 2026 will keep the 16 percent. Conversely, this means that you will have to pay tax on 84 percent of your pension for 2026. But in practice it is not that simple.
- Annual pension of 15,000 euros is above the basic allowance of 12,384 euros.
- But you have an allowance of 16 percent, which is 2,400 euros.
- If you deduct the allowance from the annual pension, you are left with 12,600 euros
- This means you are just above the basic allowance and therefore have to submit a tax return.
Approach your tax return correctly
Incidentally, the downstream taxation not only affects the statutory pension, but also pensions due to reduced earning capacity and survivors’ pensions. The same applies to private pension schemes, for example Riester and Rürup pensions, and company pension schemes are also fully taxable at retirement age.
But to stick with the example above: Just because the taxable pension portion is 12,600 euros does not mean that you actually have to pay taxes. You can of course deduct various items in your tax return, such as pension expenses, business expenses and special expenses. It can happen that you end up below the basic allowance and don’t have to pay taxes.
It’s best to go through the whole thing with tax software, such as with Check24 taxwhich can be used completely free of charge. Here you can also calculate the individual case.
If you are single and retire at the beginning of 2026, you are still below the tax limit with an annual pension of up to 17,426 euros. But be careful, not only the pension allowance is individual, but also the deduction features in the tax return. So be sure to calculate your situation. A Pension tax calculator helps with that.
2,000 euros tax-free with active pension
Since the beginning of 2026 there has been a new tax bonus called “Active Pension”. The idea: The term stands for a model in which pensioners up to 2,000 euros tax-free can earn extra money per month.
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