Uncovering Tax-Free Pension Limits in Germany for New Retirees
Amount of Retirement Income Exempt from Taxation - What's the potential pension amount based on tax-exempt conditions?
Navigating the world of pensions and taxes can be a daunting task, but fear not! This guide is here to shed some light on the tax-free pension limits for new retirees in Germany.
by Nadine Oberhuber** ~ 2 Min read
The Ministry of Finance keeps track of these numbers year by year: In 2025, fresh retirees might enjoy an annual gross pension of 16,243 euros, tax-free. That's 1,353 euros per month for singles. For couples, the tax-free limit doubles. If you started drawing your pension in 2005, you may have even evaded taxes on up to 19,758 euros annually. This increase in the tax-free limit is a result of the gradual adjustment of pension taxation in place since 2005. Every year, the tax-free limit decreases slightly due to the rising taxation proportion.
In the year 2025, 83 percent of the pension was taxable. Initially, the government had set a goal for full taxation by 2040, but due to changes, it will only be implemented in 2058, according to the Growth Opportunities Act. Essentially, pensions will be taxed later, allowing workers to contribute a larger portion of their untaxed income towards retirement savings each year.
Who Needs to File a Tax Return?
This shift in taxation is meant to promote a sense of fairness in retirement savings and encourage private savings from younger individuals. Taxes will only apply to payouts from private retirement plans. If your pension income in the previous year exceeded €11,604, you'll likely need to file a tax return, even if you retired many years ago. As of 2026, this limit increases to €12,084. Keep in mind that retirees may have deductions that allow them to exceed this threshold without paying taxes.
Taxable Pension Proportion: 83 Percent
Using the Ministry of Finance's calculations, a new retiree collecting the maximum tax-free pension (€16,243) in 2025 would be subject to taxation on €13,481 (13,530 - 102 - 36 - 1,739). To put it into perspective, this is about 1,123 euros per month - assuming no further deductions.
Long-term retirees (since 2005) could have received the same amount tax-free, which is €1,610 monthly.
- Retirement
- Pension Taxation
- New Retirees
- BMF
A Look Back: The Evolution of German Pension Taxation
Over the years, the taxation of pensions in Germany has undergone significant changes to adapt to economic conditions and government policies. Traditionally, pension taxation has been tied to individual income, with a basic tax-free allowance that varies for singles and couples.
Recent Developments
- 2025 Changes: As of 2025, there have been updates to how foreign pension plans are taxed in Germany. Payments from US pension plans are now subject to taxation here if the beneficiary is deemed a resident, breaking away from previously advantageous tax conditions for such payments[2].
- Retirement Flexibility and Taxation: The German government has put forth plans to increase the flexibility of retirement, allowing for tax-exempt earnings of up to €2,000 for individuals working past retirement age[1]. Additionally, there are attempts to secure the statutory pension level at 48% by 2031, with tax funds covering any additional costs[4][5].
- The updates to the taxation of foreign pension plans in Germany, such as payments from US pension plans, are now subject to taxation for residents, as of 2025.
- Retirees in Germany may have deductions that allow them to exceed the threshold of €11,604 (in 2026, it will be €12,084) for filing a tax return, even if they started collecting their pension many years ago.
