Who benefits most from the new pension taxation

Berlin Olaf Scholz was full of energy when the Federal Fiscal Court (BFH) made an important ruling on pension taxation in May last year. “The next legislative period must begin immediately with a tax reform that relieves small and medium-sized incomes,” said the SPD chancellor candidate at the time and today’s chancellor.

Because the top financial judges had called for a reform because the pension taxation introduced in 2005 could lead to unconstitutional double taxation. In the transition to deferred pension taxation, which stretches over more than three decades, the tax authorities may hit some pensioners twice: once during the savings phase and a second time during the payment phase of the pension.

The SPD, Greens and FDP had therefore agreed on a reorganization in the coalition agreement. Employees should not only be able to fully deduct their pension contributions from tax from 2025, but two years earlier. And the full taxation of pensions should not be achieved as early as 2040, but only 20 years later.