Uncovering the Tax-Free Pension Limit: How Much Can You Earn Without Paying Taxes?
- Brought to you by Nadine Oberhuber
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What's the tax-free pension amount I'm eligible for? - Can one collect a pension tax-free?
The German Ministry of Finance provides a breakdown of the tax-free pension limit each year. In the year 2025, new retirees can receive up to 16,243 euros in annual gross pension, tax-free. For singles, this limit doubles for couples. Additionally, retirees from as early as 2005 could enjoy up to 19,758 euros, tax-free. This shift is due to the gradual adjustment of pension taxation put in place since 2005. The tax-free allowance for new retirees decreases slightly each year, while the portion of their pension that is taxed increases.
Last year, 83 percent of gross pension was subject to taxation. The original plan was that by 2040, 100 percent would be taxed, but now full taxation will only apply from 2058, as stipulated by the Growth Opportunities Act. Essentially, this means that retirees can contribute a slightly larger amount of their income to retirement savings without it being immediately taxed.
Tax Returns for These Pensioners
This policy aims to establish a degree of fairness in retirement savings and encourages younger individuals to save privately. These savings are taken from their untaxed gross income, and only the pensions from these retirement contracts are then taxed. It's presumed that retirees will have lower tax rates. Therefore, those who save for retirement could potentially enjoy a small tax advantage.
As a result, anyone with over 11,604 euros in pension income from the previous year (2024), regardless of when they retired, must file a tax return. In the current year (2025), the threshold is 12,084 euros. This is the current tax-free allowance for pensioners, with basic taxation starting from this amount, roughly equating to around 1,000 euros in pension per month. However, if pensioners can claim other deductions, such as advertising costs or special burdens, their total income can still be tax-free. The tax office will verify this on a case-by-case basis.
Taxable Portion of the Pension: 83%
To explain the calculation, the taxable share of the pension for new retirees in 2025 is 83 percent. This means that only 13,481 euros of the 16,243 euros in tax-free pension are subject to taxation. From this, retirees can also deduct advertising cost and special expense allowances, as well as retirement provisions, resulting in the 11,604 euros threshold. Long-term retirees who retired in 2005 can still receive 50 percent of their pension income tax-free, up to 19,758 euros or 1,610 euros per month.
- Taxation of Pensions
- BMF
- New Retirees
- Gradual Adjustment of Pension Taxation
[1] Enrichment Data: As a single individual in 2025, the general tax-free allowance amounts to €12,096 per year or €1,008 per month. For couples, the combined tax-free allowance is €24,192 per year or €2,016 per month.
[2] Enrichment Data: In addition to the tax-free allowance, there is a yearly flat-rate deduction of €102 applicable to all pension sources.
[3] Enrichment Data: The gradual adjustment of pension taxation in Germany is part of the ongoing pension reform aimed at ensuring the sustainability of the pension system and increasing tax revenues from pension payments. This shift means that new retirees will face a larger taxable portion of their pension income, while previous retirees benefits from a higher tax-free limit in comparison.
- The community policy and employment policy of the German Ministry of Finance are intertwined, as they relate to the tax-free pension limit and the gradual adjustment of pension taxation.
- The tax-free pension limit for wealth-management and personal-finance purposes, such as retirement planning, is influenced by the finance sector, as changes in policy can affect the taxable portion of pension income.
