Retirees and Tax Returns: When Filing Is Required

Is the pension taxable?

Yes, but only partially. The statutory pension and other life annuities are classified as “other income” (Section 22(1) of the Income Tax Act [EStG]). Only the taxable portion is taxed; the remainder remains tax-free. The percentage depends on the year in which the pension began, not on the year in which it is paid out.

Anyone who retires in 2026 will have a taxable portion of 84%. Anyone who began receiving benefits in 2015 will remain at 70%. This percentage will not change for the remainder of the person's retirement.

What is the tax rate after retirement begins?

Through 2005, the tax rate is 50 percent. From 2006 to 2020, it will increase by 2 percentage points per year to 80%; in 2021 and 2022, it will increase by one point each year; and starting in 2023, it will increase by 0.5 points per year. The table shows selected retirement years. For pensions commencing in 2058, 100% of the pension is taxable.

What is the pension exemption amount, and why does it remain the same in euros?

The tax-exempt portion of the pension is the difference between the annual pension and the taxable portion. It is set as a fixed amount in euros for the entire term, effective the year after the pension begins (Section 22, No. 1, Sentence 3, Letter a, Subletter aa of the Income Tax Act (EStG)). Regular pension increases do not affect this amount. Therefore, they are fully taxable.

When do you have to file a tax return as a retiree?

Retirees who do not receive wages subject to withholding tax must file a tax return if their total income exceeds the basic tax-free allowance (Section 56 of the Income Tax Implementation Regulation (EStDV)). Married couples who file a joint tax return must file a return if neither of them received wages with tax withheld and the total amount of their income exceeds twice the basic exemption amount. If one of them received wages with tax withheld—for example, from a part-time job—the rule for cases involving wages applies to both (§ 46(2) EStG; see below). The basic tax-free allowance is €12,096 for 2025 and €12,348 for 2026 (Section 32a of the Income Tax Act (EStG)).

The benchmark is the total amount of income, not the gross pension. For the pension, the taxable portion—minus the flat-rate deduction for income-related expenses of 102 €—is what counts. If you have other income in addition to your pension—such as rental income—the senior citizen tax relief amount reduces your total income; the statutory pension itself is not taken into account. Special expenses, such as health insurance premiums, are deducted only afterward and do not affect your tax liability.

What deductions can you claim as a retiree?

How does the tax office know about your pension?

The statutory pension insurance providers, professional pension funds, insurers, and other providers report pensions electronically to the central agency (Section 22a of the Income Tax Act). The pension payment notification includes, among other things, the pension amount, the start and end dates of the payments, and the contributions to statutory health and long-term care insurance. The tax authorities thus receive the data without any action on the part of the pensioners.

What are the rules regarding pensions and additional income?

If a retiree also earns wages subject to payroll tax withholding—for example, from a “mini-job” or a part-time position—a different rule applies: An assessment is conducted if the positive sum of income not subject to withholding tax, reduced by the applicable senior citizen tax relief amount, exceeds €410 (Section 46(2)(1) of the Income Tax Act (EStG)). The pension, including the taxable portion minus the flat-rate deduction, counts toward this income. A separate threshold of €410 applies to income and benefits subject to the progression clause, such as wage replacement benefits received in the same year. Details on additional income can be found in the article on the €410 limit.

In addition, the “active pension” has been in effect since 2026. Income from employment is tax-exempt up to a total of €24,000 per year (Section 3(21) of the Income Tax Act), provided they are paid for work performed starting the month following the attainment of the standard retirement age and the employer is required to pay pension insurance contributions for this work. For each month in which the requirements were not met, the amount is reduced by one-twelfth; this reduction is taken into account on a pro-rata basis in the withholding of income tax. Income from self-employment is not included, nor are pension benefits.