All you need to know about adding your pension insurance to your income tax returns

If you live in Germany and you have subscribed to a pension insurance plan, you may be wondering whether this ongoing expense can be filed with your income tax returns. The simple and straightforward answer is: yes you can (and you should), but there are limits to the percentage of your expense that you can claim, and these limits will change depending on different factors. While the exact numbers may change each year, you can learn the essentials about this topic by reading through this article.

The underlying principle of income tax returns is allowing you to recover come of your taxation expenses each year. This is typically possible by submitting proof of special expenses you’ve had during the previous year, which can be used to offset your taxation in your favor.The expenses regarded as “special” (allowing with the allowed limits for each of the accepted types of expense) are adjusted each year, so you might want to make sure to get the latest available information from your accountant.

Generally speaking, insurance contributions are typically classified as special expenses that can be claimed with the help of an income tax return; these kinds of spendings are regarded as (and classified under) private life expenses.

Not all insurance contributions can be claimed, so it’s always a good idea to check what types of insurance are allowed in your income tax returns. Some examples of insurance whose expenses you can’t rebate include fire, water, legal protection or motor insurance. Whenever you apply for a new type of insurance, it’s always a good idea to ask your insurance provider if you’ll be allowed to file your spendings with them in your next year’s income tax return.

The diversity and complexity of available insurance (along with the available income tax returns) typically surprises people from other countries who are new to Germany. Truth of the matter is that Germans are likely the first and foremost nation in the world, when it comes to taking out insurance as a way to plan ahead and mitigate unexpected risks. Hardly any other people on earth are so anxious to protect themselves against all events, which is possibly a testament of the strong rationality of this nation.

The bottom line regarding your pension insurance expenses and your income tax returns - yes, they belong together, but certain maximum amounts apply and must be observed when you’re filing your income tax forms. Read through the following sections to get all the information you need about this topic.

Understanding the two the possible subdivisions of pension expenses

Since 2005, pension expenses in Germany have consistently classified under two main categories: precautionary expenses and pension expenses.

Pension expenses essentially covers all types of pension insurance, including Rürup pension and others.

Other precautionary expenses includes contributions to the unemployment fund, occupational disability, liability insurance, and other similar insurances.

It’s important to keep the distinction in mind since both of these categories can be taxed up to a certain maximum amount, which can be adjusted each year. Very typically, pension expenses tend to be favored for tax purposes, over precautionary expenses.

Note: Endowment life insurance and annuity insurance are only recognized if the insurance period started before 01/01/2005 and provided you have received at least one contribution by the end of 2014.

Pension expenses are deductible up to a certain percentage

See the following chart to check the correlation between your expenses and the available tax refunds.

What is the deductible portion for other pension expenses?

The extent to which other pension expenses are tax deductible also depends on the occupational group. They are considered as special expenses only up to a maximum amount, so you have to check the deductible limit each year. The only exception are your contributions to basic medical care, which can always be deducted in full.

In general, other pension costs up to a maximum of € 1,900 are tax deductible. Since these limits can be adjusted each year, it’s always a good idea to check the latest data from the fiscal authorities, in order to avoid mistakes when filing your tax form that might cause unneeded delays in your tax return.

The general tax deductible limit (of € 1,900) mentioned above applies first and foremost to:

  • Social insurance employees (sozialversicherungspflichtig)
  • Grade receiver (Besoldungsempfänger)
  • Officials who are voluntarily insured in the statutory health insurance (Beamte in der gesetzlichen Krankenversicherung - freiwillig)
  • Retirees who are voluntarily or privately insured in the GKW (Rentner in der gesetzlichen Krankenversicherung - freiwillig)
  • pensioners (Versorgungsempfänger)
  • Persons for whom tax-free services (steuerfreie Leistungen) of the Künstlersozialkasse are provided
  • Pensioners who are compulsorily insured in the GKV (pflichtversicherte Rentner in der gesetzlichen Krankenversicherung)
  • Recipient of unemployment benefits (Arbeitslosengeld)
  • Non-working spouse
  • Non-contributory family members in the GKV (beitragsfrei familienversichert)

Note: Self-employed professionals have the opportunity to claim insurance expenses of up to 2,800 euros. Married couples have a maximum amount of 3,800 euros for their combined expenses.

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