Pensioners have been receiving more money since July 1st. But despite the increase in the basic allowance, fewer and fewer people are avoiding a tax return after the end of their professional career. What does that mean for future retirees?
On July 1, pensions were increased more than they had been in decades. Do pensioners now have to submit a tax return?
According to the United Income Tax Assistance Association (VLH), those whose taxable portion of their annual income exceeds the basic allowance are obliged to file a tax return. In addition to the statutory pension, income also includes payments from a widow’s or company pension. However, income from renting and leasing is also included.
The good news: The basic allowance has been increased more than the pension. It rose from 9,744 to 10,347 euros – an increase of 6.19 percent. Double the amount applies to married and civil-law couples. The pension, on the other hand, was increased by 5.35 percent in the west and 6.12 percent in the east on July 1. Looking at the whole of 2022, this is a pension increase of 2.68 percent (West) and 3.06 percent (East). This means that the increase in pension is still below the basic allowance.
The crux of the matter: According to the VLH, the taxable portion of the pension has increased by one percentage point every year since 2020. For pensioners who retire this year, only 18 percent remain tax-free. Younger cohorts are left with even less. From 2040, all pensions will be taxed at 100 percent. Despite the current increase in the basic allowance, future generations will not be able to avoid a tax return even after the end of their professional career.
Conversely, this means that people who have been retired for a longer period of time have to pay tax on a lower proportion. According to the VLH, pensioners can claim a number of their expenses – including medication, dentures, care or craftsmen. If the remaining income is below the subsistence level, no taxes are applied. In the end, you don’t have to automatically pay taxes despite your tax return.
(This article was first published on Wednesday, July 06, 2022.)
