Unveiling Tax-Free Pension Limits: How Much Can I Secure Without Paying Taxes?
- By Nadine Oberhuber
- + - 2 Min
How to get a tax-free retirement pension. - Investigating tax-exempt pension amounts: A financial exploration.
Every year, the Ministry of Finance lays out the tax-free pension threshold - the maximum annual pension amount a retiree can receive without having to shell out taxes. In 2025, newly-retired individuals can pocket 16,243 euros in annual gross pension without any tax hassles. This figure applies to singles, and for couples, it doubles. Veteran retirees who retired in 2005 can reap a more substantial tax-free pension of up to 19,758 euros[1]. This benefit stems from the gradual adjustment of pension taxation that commenced in 2005. Consequently, the tax-free allowance decreases slightly every year as the proportion of the pension subject to taxation increases.
In the financial year of 2024, 83 percent of the gross pension was taxable[1]. The initial plan was to make the entire pension taxable by 2040, but thanks to the Growth Opportunities Act, full taxation will now only apply in 2058. This means that deferred taxation comes into play, allowing employees to contribute a little extra towards retirement savings without incurring immediate taxes.
Who Needs to File a Tax Return?
The regulation promotes fairness in retirement savings and encourages younger populations to save privately because their initial contributions come from their untaxed gross income. Upon retirement, only the payouts from these retirement contracts are taxed, assuming lower tax rates for retirees. Hence, those saving for retirement stand to enjoy a small tax advantage.
Consequently, if one had over 11,604 euros in pension income in the previous year 2024, they need to typically file a tax return, regardless of their retirement year. In 2025, the threshold is 12,084 euros[1]. Taxation kicks in from this point, but retirees with advertising costs, special deductions, or extraordinary burdens may exceed this limit tax-free. The tax office would require a case-by-case assessment to determine this.
What's the Rate of Tax on My Pension?
The Ministry of Finance's calculation in 2025 is such: The highest annual gross pension that new retirees can receive without taxation is 16,243 euros. This amounts to 1,353 euros per month. The current taxation rate for their pension is 83 percent, making only 12,870 euros of the 16,243 euros taxable. Retirees can claim advertising cost allowance (102 euros), special expenses allowance (36 euros), and retirement provisions up to 1,739 euros. This translates to 11,604 euros for 2024.
On the other hand, long-term retirees who retired in 2005 can still enjoy 50 percent of their pension income tax-free, equivalent to 19,758 euros or 1,610 euros per month[1].
- Tax
- Pension taxation
- New retirees
- BMF
- The pension taxation policies, as outlined by the Ministry of Finance, affect both new and veteran retirees, with the former able to receive up to 16,243 euros in tax-free annual pension in 2025.
- To better manage their personal finances during retirement, individuals should be aware of the tax rates on their pension income, as those with over 12,084 euros of pension income in 2025 are typically required to file a tax return.
