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New tax changes for pensioners in Germany in 2024

Individuals contributing to German pension insurance or already receiving a pension will encounter several changes this year. While some cases involve simpler regulations, others see an increased tax share. Here are upcoming changes for pensions taking effect in 2024.

New pensioners will experience increased tax payments

Starting in 2024, those retiring will be subject to higher taxes on a greater portion of their pension. Specifically, the taxable share of the pension will be 84 percent, up from the previous 83 percent, effective January 1st. This implies that 16 percent of the initial full gross annual pension will now be exempt from taxes. It’s important to note that this change applies solely to new pensioners, and existing pensions remain unaffected.

According to the German Pension Insurance, this “subsequent taxation” often benefits new pensioners. The rationale behind this is that expenses for retirement provision reduce the tax burden during the working phase. Once an individual enters the retirement phase, their income decreases, resulting in a lower tax share on the pension.
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In the future, the increase in the taxable pension share should only happen in increments of half a percentage point. The necessary legislative process for this change, however, has not been completed yet. Initially, policymakers intended to make pensions fully taxable by 2040.

Those retiring will be subject to higher taxes on a greater portion of their pension.
Those retiring will be subject to higher taxes.

Higher limits on additional earnings for disability pensions

From January 2024, individuals receiving a pension for reduced earning capacity can earn more income. Those with partial disability pensions have a new minimum annual additional income limit of 37,117.50 euros, while individuals with total disability pensions face a limit of 18,558.75 euros.
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Pensioners with incapacity are restricted to employment or self-employment within the bounds of their assessed capacity. Violating this rule jeopardizes their entitlement to a disability pension, even if they adhere to the additional earnings limits. As per the German Pension Insurance, those with total incapacity pensions are permitted to work for less than three hours daily, while those with partial disability pensions can work up to six hours.

Long-term insured individuals will receive lower pension amounts from 2024.

Individuals with a minimum of 35 years of coverage in statutory pension insurance can request the long-term insured old-age pension starting at 63. However, opting for early retirement entails a higher deduction from the pension, with a rate of 0.3 percent for each month between the application and reaching the regular retirement age.

Due to the ongoing gradual increase in the regular retirement age, the deduction on the pension for those opting for early retirement is also rising. For instance, individuals born in 1961 reaching the age of 63 in 2024 can apply for the long-term insured old-age pension, but they must acknowledge a deduction of 12.6 percent. In comparison, those born in 1960 had a lower discount of 12.0 percent.

Increased assessment limit and reference amount applicable to pensioners.

From January, there is an increase in the contribution assessment limit for pension insurance. Instead of the previous 7,300 euros, it will be raised to 7,550 euros (for old federal states) or 7,450 euros (for new federal states) per month as of January. When calculated annually, this amounts to 87,600 euros. The contribution assessment limit establishes the threshold beyond which earned income contributes to the calculation of pension insurance contributions. Individuals insured do not need to contribute for income surpassing this limit. Essentially, this implies that individuals with higher incomes will incur higher insurance contributions.

The reference size is also set to increase. Starting January 1st, it will be 3,535 euros per month in the old federal states and 3,465 euros in the new federal states. The reference value is crucial, particularly in the calculation of contributions for self-employed individuals under insurance obligations. Additionally, it is intended to function as a standardized measure to mitigate variations in regulations across different insurance branches.
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The monthly earning limit for a mini-job will increase in the coming year
The monthly earning limit for a mini-job will increase.

Mini-jobbers can earn more to boost their pension

In the upcoming year, the monthly earning limit for a mini-job will be 538 euros, marking an increase of 18 euros from the current limit of 520 euros. According to the Techniker Krankenkasse, mini-jobbers can earn up to 6,456 euros annually before insurance is mandatory. Exceeding this limit is allowed occasionally, but only unpredictably and within specified limits. As a guideline, in a maximum of two calendar months per year, the earnings can reach up to twice the monthly limit, amounting to 1,076 euros in those months starting from 2024.

Simultaneously, the lower limit for midi-jobs will rise to 538.01 euros starting January 1st. Individuals earning between 538.01 euros and 2,000 euros monthly fall under the category of midi-jobbers. They contribute only a portion of the social security contributions, with the amount increasing based on their actual salary. Once the salary exceeds 2,000.01 euros, the full contribution is applicable. Employers must make adjustments accordingly if they do not specify the statutory minimum wage in the contracts of their mini-jobbers.