What's the remaining amount of the 1600 euro pension after deductions have been made?
In Germany, changes are afoot regarding the taxation of pensions. Here's a breakdown of the key points for retirees:
- The pension allowance, which varies depending on the year of retirement, is currently being reduced by one percentage point per year. In 2020, the allowance stood at 20%. By 2040, it is planned to be reduced to zero.
- For a gross pension of 1600 Euro per month, 80% is taxable if you retired in 2020. This means 15,360 euros are taxable. Retirees can subtract the basic tax allowance (Grundfreibetrag), which in 2020 was around 9,408 euros for singles. Taxes are only due if the taxable portion exceeds this allowance.
- The tax-free portion for a 1600 Euro pension in 2020 is 3840 Euro. After this, the taxable amount is 13,120 Euro. It's important to note that not all taxpayers are eligible for the pension allowance.
- In addition to taxes, retirees are also required to make contributions to health and long-term care insurance. The contribution amount for a 1600 Euro pension in 2020 is 2102 Euro.
- The final taxable amount for a 1600 Euro pension in 2020 is adjusted by a flat rate for expenses for pensioners of 102 Euro and a special expenses allowance of 36 Euro.
- The average pension in Germany in 2024 was 1.154 Euro per month. After 2040, pensioners will have to tax their entire pension if they retire. However, those who retire before 2040 will still benefit from the pension allowance.
- A new book titled 'Money back from Father State - Tax return for pensioners and retirees 2024/2025' has been published by the consumer center, providing valuable information for retirees navigating the complexities of taxation.
As retirees approach their golden years, understanding the intricacies of pension taxation is crucial. It's always a good idea to consult with a tax advisor to ensure you're making the most of your retirement income.
