Pensions tax in Germany: how much and from what amount

Pensions in Germany are taxable, but far from entirely and not for everyone. For the majority of standard old-age pension recipients, no tax arises at all: the amount does not reach the tax-free allowance. For those who receive more or have other income, the tax is calculated according to rules that are worth understanding in advance.

Below is what makes up the allowances, how to calculate your tax-free portion and why the tax tables that are still floating around the internet are out of date. This material is for informational purposes and does not constitute tax advice.

A few facts about pensions in Germany:

A pension is income, subject to tax, besides, pensioners pay contributions towards medical and social insurance
For pensioners, the Grundfreibetrag—the tax-free living allowance—also applies, which in 2026 is 12,348 euros per year
Pension benefit — 100% pensions will only be subject to tax from 2058; until then, part of the pension (depending on the year of retirement) is exempt from tax
According to Statista, the average pension for men in 2022 EUR 1,281 per month, in women 972 euros a month

personal allowance

Basic tax-free allowance — the tax-free subsistence minimum. In 2026 this is 12.348 € per person per year. Anything below this amount is tax-free – including the pension.

With joint taxation for spouses, the minimum is doubled: 24.696 € a year for two.

It's not just the pension that is counted. The amount includes all income: the pension, rental income, profits from the sale of securities, part-time work, and other sources.

For comparison, in 2024 the Grundfreibetrag was €11,604, and in 2025 it is €12,096. It increases almost every year, so calculations from past years cannot be applied to the current year.

The opposite case is when the pension does not even reach the subsistence level. Then it is no longer about tax but about a top-up to the subsistence level in old age: it is paid by the social welfare office and calculated under different rules.

Why old spreadsheets on the internet no longer work

Until 2024, the taxable share grew by one percentage point per year, and under the plan, the pension was to be fully taxable by 2040. With the Growth Opportunities Act (Wachstumschancengesetz), passed on 22 March 2024, the increment was reduced up to 0.5 percentage points per year, and with retroactive effect — starting with those who retired in 2023.

What this means in practice:

For the 2023 release year, the share stood at 82,5 % instead of 83 %.
Full taxation has been pushed back from 2040 to 2058.
For everyone who has retired since 2023, the tax-free allowance has increased—meaning the old calculation underestimated the relief.

The tables showing 2024 with a share of 84 %, and 100 % being reached in 2040, were compiled before the reform. There are still plenty of them in the search results.

pension allowance

Rentenfreibetrag — the tax-free portion of the pension itself. It depends on the year of retirement: the later a person retires, the larger the proportion of their pension that is subject to tax and the smaller the tax-free portion.

Retirement age

Proportion of the taxable portion in %

Retirement age

Proportion of the taxable portion in %

Retirement age

Proportion of the taxable portion in %

Source

The exempt portion is calculated once — based on the amount of the pension for the first full calendar year following retirement. After that, this fixed amount in euros, which remains unchanged for the rest of one’s life. This leads to an important consequence: every increase in one’s pension is taxed in full, because the tax allowance does not increase accordingly.

How the pension tax amount is calculated – an example

This is an approximate calculation The exact amount of the pension and the size of the taxable portion are confirmed by the Finanzamt. Contributions towards health and long-term care insurance, as well as special expenses, are calculated on an individual basis.

Irma retired in 2023; her pension is €1,300 a month, or €15,600 a year.

For the 2023 tax year, the taxable portion amounts to 82,5 %. This means that €12,870 is subject to tax, whilst the remainder is tax-free:

€15,600 − €12,870 = 2.730 € — that is her pension allowance. It is fixed for life, even if her pension increases.

Now let’s add up the allowances: the basic allowance of €12,348 plus the pension allowance of €2,730 — €15,078 per year is tax-free. In addition to this, health insurance and care insurance contributions are added, which also reduce the tax base.

Irma's pension of €15,600 exceeds this threshold by about €500. Taking insurance contributions into account, she will likely not incur any tax at all. However, if her pension increases or a second income arises, she will have to submit a tax return.

Please note: prior to the 2024 reform, a rate of 83 % applied for the 2023 retirement year, and the Rentenfreibetrag was lower — €2,652. Calculations based on the old tables result in an underestimated allowance.

Tax return for pensioners

If the income exceeds the tax-free allowance, the pensioner is obliged to submit an annual tax return to the Finanzamt and pay tax.

The need to file a tax return often arises without one realising it. Typical reasons include:

Pension increase. The allowance is fixed in euros and does not increase, so the entire increase is subject to tax.
The death of a spouse. Joint taxation ends, and the doubled Grundfreibetrag no longer applies.
A second source of income — Rürup-Rente, private pension scheme contract, rent, interest on deposits.
Working whilst retired. Earnings are combined with the pension.
A payment from a Betriebsrente. It is fully subject to income tax, and health and long-term care contributions are deducted from it as well — explained in detail in the article on the company pension in Germany.

You can only determine whether you need to pay and, if so, how much, by checking the tax notice from the Finanzamt. Until you receive it, any calculations are merely estimates.

Frequently asked questions

At what pension amount does tax become payable in Germany?

There is no single figure: the threshold is made up of the Grundfreibetrag and your personal Rentenfreibetrag, which depends on the year you retire. For those who retired in 2023 with a standard pension, the threshold is around €15,000 a year.

Why did the tax appear, even though it didn't exist before?

Most often because of a pension increase. The allowance is fixed in euros and does not rise along with the pension, so the increment is taxed in full.

Do I need to file a tax return if my pension is small?

If income falls within the tax-free allowance – no. But the Finanzamt can send a request to submit a return, and then it must be submitted regardless of the amount.

Is the Rürup or private pension taxable?

Yes, but according to their own rules and their own share. Such payments are combined with the state pension and it is often precisely because of them that the obligation to file a tax return arises.

What you can change in advance. The Finanzamt calculates the tax on your pension, and once you have retired there is little left to reduce. The structure of your future payouts, however, is your choice: Rürup, bAV and private schemes carry different tax consequences, and that is decided before retirement, not after. Book a free consultation — we will go through what your retirement income will be made of. We do not provide tax advice.

About the author. Valeriy Melekh, Finber. Insurance broker with licence under § 34d para. 1 GewO and real estate finance broker under § 34i GewO, IHK Rhein-Neckar. Over 20 years of practice, around 6,000 clients.

Sources. Changing the taxation step and deferring full taxation to 2058 — message from Deutsche Rentenversicherung about the Growth Opportunities Act. The amount of the Grundfreibetrag for 2026 — § 32a EStG.

Relevance. Data checked in August 2026. The Grundfreibetrag is reviewed almost annually — we update the page with every change.

This material is for informational purposes only and does not constitute tax advice. The exact calculation is performed by the Finanzamt or a tax advisor.