Income tax return – pension increase – tax consultant – tax consulting – Holzwickede – Kamen – Lünen – Hagen – Dortmund

Persons residing in Germany

must file an annual income tax return for the previous calendar year if their total income exceeds the basic tax-free amount of EUR 8,820 for 2017 (or EUR 9,000 for 2018) (EUR 17,640 or EUR 18,000 for married couples filing jointly). This obligation also applies to pension recipients.

Since pensions from statutory pension insurance are only partially taxed, many pensioners do not have to pay income tax. The tax-free portion of pensions from statutory pension insurance is determined once at the start of the pension; this tax-free amount generally remains constant for the entire pension withdrawal period. Pension increases regulated by law can cause pensions to “grow” into income tax liability.

The tax-free portion of the pension

depends on the year in which the pension starts and will be gradually reduced; if the pension starts in 2018, only 24% of the “initial pension” will be tax-free for the entire pension period.

If pensioners generate other income in addition to their pension (e.g. from company pensions or renting and leasing), the limit for income tax liability may be exceeded even for pension amounts lower than those given in the examples. This must be checked on a case-by-case basis.

(Further comments & information on this can be found in our information letter 06/2018 under the item 4.)