Can I avoid double taxation when it comes to taxing retirement benefits?
May 26, 2022 | 120,00 EUR | answered by Isabel Zimmermann
Dear tax consultant,
My name is Phillip Kleine and I am currently dealing with the topic of retirement benefits and double taxation. Several years ago, I took out a private pension plan and I am unsure whether these benefits could be subject to double taxation in old age.
I am aware that retirement benefits such as pension payments or payouts from a life insurance policy are subject to taxation. However, I am concerned that there could be double taxation, as the contributions to the pension plan have already been taxed.
My worry is that in retirement, I may have to pay a significant portion of my retirement benefits to the state due to double taxation, leaving me with less money than planned. Therefore, I would like to know if there are ways to avoid double taxation when it comes to taxing retirement benefits.
Are there any tax measures or optimization possibilities to avoid or at least reduce double taxation? Or are there specific regulations or laws that can help me as a taxpayer in this situation? I would be very grateful if you could provide me with possible solutions or alternatives to effectively manage the taxation of my retirement benefits.
Thank you in advance for your support and expertise.
Sincerely,
Phillip Kleine
Dear Mr. Kleine,
Thank you for your question regarding the double taxation of retirement benefits. The fear of double taxation in retirement is understandable, as it can significantly reduce your available retirement benefits. It is important to be aware of the tax aspects of retirement planning in order to find possible solutions.
In general, retirement benefits such as pension payments or payouts from life insurance policies are subject to taxation. However, there are regulations in place to prevent double taxation. One of the most important instruments to avoid double taxation in the area of retirement planning is the so-called tax assessment share.
The tax assessment share determines which portion of retirement benefits is taxable. It takes into account that contributions to retirement planning have already been taxed at the individual tax rate. Therefore, only the earnings share, i.e. the portion of the benefit attributable to the earned income, is taxed. This is done to avoid double taxation.
There are various ways to optimize the taxation of retirement benefits and avoid double taxation. One option is to structure retirement benefits cleverly, for example by choosing a tax-optimized product or by spreading the benefits over different tax years. Utilizing tax exemptions and deductions can also help reduce the tax burden.
Additionally, there are specific regulations and laws that are intended to support taxpayers. For example, special tax deductions or special regulations for retirement benefits can be utilized. It is advisable to seek advice from an experienced tax advisor to find individual solutions tailored to your personal situation.
Overall, it is possible to avoid or at least reduce double taxation of retirement benefits by utilizing tax measures and optimization opportunities. I recommend contacting a tax advisor to effectively structure your retirement benefits and take advantage of possible tax benefits.
I hope this information is helpful to you and I am available for further questions.
Best regards,
Isabel Zimmermann
