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Pension taxation

September 17, 2009 | 15,00 EUR | answered by Dipl.BW/SB Ulrich Stiller

My share of the pension to be taxed plus additional income exceeds the basic tax allowance of 15,328 euros (for a married couple). For tax calculation, is the basic allowance deducted from the taxable amount or does the entire amount apply when the allowance is exceeded?
P. Ahrenholz

Dipl.BW/SB Ulrich Stiller

Dear client,

Thank you for your inquiry, which I would like to answer based on the information provided and in the context of your situation as follows:

The basic allowance is intended to exempt the necessary subsistence level from taxation and thus correspond to the principle of taxation according to economic capacity. It is automatically taken into account and is already incorporated in the income tax basic or splitting table. The current income tax rate for the assessment period 2008 starts with an initial tax rate of 15% when the basic allowance is exceeded, and then increases until the top tax rate of 45% is reached.

You can calculate as follows (for married couples, double the amounts):

- Tax-free basic allowance (subsistence level) of 7,664 EUR,
- First, linear-progressive zone from 7,665 EUR to 12,739 EUR with a marginal tax rate increasing from 15% to 23.97%,
- Second, linear-progressive zone from 12,740 EUR to 52,151 EUR with a marginal tax rate increasing from 23.97% to 42%,
- First proportional zone from 52,152 EUR onwards with a constant marginal tax rate of 42%,
- Second proportional zone from 250,001 EUR onwards with a constant marginal tax rate of 45%.

I hope this information is helpful to you.

Yours sincerely,

Ulrich Stiller
Tax advisor