- By Nadine Oberhuber
- Estimated Reading Time: 2 minutes
Tax-free pension limit: Explained concisely for your understanding - Estimating your pension exemption amount:
The German Finance Ministry has set annual tax-free pension limits that vary based on your retirement year:
In 2025, new retirees can receive a gross annual pension of up to 16,243 euros without taxation if they're single, while for couples, this limit doubles. For retirees who started receiving pensions in 2005, the tax-free limit could even stretch up to 19,758 euros. This evolution is due to the progressive pension taxation adjustments that commenced in 2005. The tax-free limit decreases every year, as the proportion of the pension subject to taxation grows accordingly.
In 2024, approximately 83 percent of the gross pension was subject to taxation. Initially, it was planned that by 2040, 100 percent would be taxed, but this timeline has been pushed back to 2058 due to the Growth Opportunities Act[1][3][4]. Consequently, workers can defer a slightly higher amount of their untaxed income towards retirement savings each year without taxation.
Who needs to file a tax return?
This policy aims to promote fairness in private retirement savings by motivating younger individuals to save privately. These contributions are made from their untaxed gross income. Only the payouts from such retirement contracts are subsequently taxed. As retirees usually have lower tax rates, savers could potentially enjoy a small tax advantage[1][3][4].
Currently, individuals with more than 11,604 euros in pension income in 2025, regardless of retirement year, are generally required to file a tax return[1][3][4]. In 2025, the threshold increases to 12,084 euros. Generally, taxation starts from this amount if no other deductions can be claimed. However, retirees may be able to claim advertising costs or special deductions, which could exceed this allowance[1][3][4]. In such cases, the Tax Office will need to evaluate their situations individually.
Portion of the pension subject to taxation: 83%
The Finance Ministry's calculation is as follows: In 2025, new retirees can receive up to 16,243 euros in annual gross pension tax-free if they're single, or 32,486 euros for couples. The taxable portion of the pension is currently 83% for them, implying that they will be taxed on 13,481 euros of the 16,243 euros (or 30,962 euros of the total 32,486 euros for couples)[1]. New retirees can still deduct advertising cost allowance of 102 euros, special expenses allowance of 36 euros, and retirement provisions of up to 1,739 euros, resulting in a total tax-free income of 11,604 euros for 2025.
Retirees who started receiving their pension in 2005 can still receive 50 percent of their pension income tax-free, which translates to up to 19,758 euros or 1,610 euros per month[1].
- Tax
- Pension Taxation
- New Retirees
- BMF
[1] German Finance Ministry Pension Taxation regulations.[2] German Tax Office guidance for retirees.[3] German Federal Government Retirement Income website.[4] German Pension Association perspective on pension taxation changes.
- The Community policy and employment policy of the German government work together to encourage fairness in private retirement savings.
- Understanding employment policy and personal-finance aspects, such as annual tax-free pension limits and progressive pension taxation adjustments, can help individuals decide how much to save towards their retirement.
