41 percent of German pensioners pay back taxes after filing, averaging 1,326 euros

The tax top-up landscape

Roughly 41 percent of German pensioners whose tax assessments were examined had to transfer money to the tax office after submitting their return. The average additional payment was 1,326 euros, though in half of all cases the amount due was at most 499 euros. Around 45 percent received a refund averaging 1,383 euros, with half of those refunds capped at 779 euros. For about 14 percent, the filing produced neither a top-up nor a refund.

Why bills arrive after filing

Stefan Heine, a tax lawyer and managing director of smartsteuer, pointed to a structural difference between pension income and employment income. No tax is withheld upfront from the state pension, unlike wages where payroll tax is deducted directly. The full tax burden therefore becomes payable only when the assessment notice arrives.

Nobody pays tax in advance on the state pension, unlike with wages where payroll tax is deducted directly from the salary.

He added that every pension increase raises the taxable portion of the pension while the once-determined tax-free allowance stays fixed. More and more pensioners therefore exceed the basic tax-free allowance and become taxable for the first time. Tax offices frequently set prepayment obligations after larger top-up amounts.

Every pension increase raises the taxable portion of the pension, but the once-determined tax-free allowance remains the same. That is how more and more pensioners exceed the basic tax-free allowance and become taxable in the first place.

Income beyond the state pension

The data also show that 48.5 percent of pensioners had additional income alongside the state pension. Employment was the most frequent source at almost 38 percent, followed by rental income at just over ten percent and income from trade or self-employment at around four percent each.

Figures from Deutsche Rentenversicherung put the total number of people receiving a statutory pension at about 21.5 million as of 1 July 2025, including disability and survivors' pensions. The pure old-age pension was paid to 19.1 million people on that date, with roughly 1.4 million additional civil-service pensioners in the public sector.

Calls to reform the system

The Taxpayers' Association is pressing for changes to the deferred pension taxation system. The group argues that tax liability should not arise solely because inflation is compensated through pension increases, and those increases should not become fully taxable.

Tax liability must not arise solely because inflation is compensated through pension increases.

The association wants the percentage pension allowance also applied to subsequent pension adjustments to prevent pensioners slipping into tax liability purely because of an inflation adjustment.