Pensions and Taxes: What You Need to Know About Your Retirement Income
- Written by: Nadine Oberhuber
- Reading Time: Approx. 2 minutes
Tax-free pension limit: Easy breakdown of regulations - Determining your pension exemption amount: A breakdown of the regulations.
Here's the lowdown on how much pension money you can pocket without worrying about taxes.
In 2025, the Ministry of Finance estimates that a solo retiree can receive a yearly gross pension amount of 17,688 euros before tax kicks in. For couples, this number doubles. However, for those who began receiving their pension in 2005, they could collect up to 23,386 euros tax-free. This shift is a result of the gradual adjustment in pension taxation since 2005. Each year, the tax-free allowance decreases a bit for new retirees, increasing the proportion of pension that is subject to tax.
By 2058, it's predicted that 100% of pensions will be taxed, as per the Growth Opportunity Act. But until then, employees have the chance to contribute a larger share of their untaxed income to their retirement savings annually, postponing the tax payment a bit longer.
Tax Returns: Who Needs To File?
The policy aims to promote a more equitable retirement savings setup, encouraging young people to invest privately. Since they contribute these amounts from their untaxed income, only the pension payouts from private retirement plans are taxed. With lower expected retirement tax rates, private savers may enjoy a slight tax advantage.
Pensioners with more than 12,084 euros of pension income in the previous year (2025) are usually required to submit a tax return. If your pension income was higher due to advertising costs, special assessments, or extraordinary burdens, you may still be tax-exempt, but the tax office will review this on a case-by-case basis.
Got Pension Income? Here's How it's Taxed:
According to the Ministry of Finance, the taxable proportion of the pension for new retirees in 2025 is 83%, which means only 12,084 euros of the 17,688 euros are subject to taxation. Retirees can deduct the advertising cost allowance of 102 euros, the special expenses allowance of 36 euros, and retirement provisions of up to 1,739 euros from their taxable income, bringing the taxable amount down to 11,604 euros.
For long-term retirees who started receiving their pension in 2005, they can still receive half of their pension income tax-free, amounting to up to 23,386 euros in 2025.
- Topics: Tax, Pensions, Retirement Income, Taxation
- Key Insight: Pension income tax limits follow the overall tax brackets and contribution limits, and it is taxed as part of total income. The Canada Pension Plan (CPP) sets specific income thresholds for contributions and maximum pensionable earnings.
- Notable Quotes: "Only the payouts from such retirement plans are then taxed," "Currently, this means: If you had more than 11,604 euros in pension income in the previous year 2024..." "The taxable proportion of the pension is currently 83 percent for them..."
- The community policy could advocate for the review and revision of the employment policy to ensure that it supports a more equitable retirement savings setup, encouraging young people to invest privately and potentially enjoy a tax advantage.
- In the discussion of personal-finance, it's crucial for employees to understand that, as per the current employment policy, they have the opportunity to contribute a larger share of their untaxed income to their retirement savings annually, postponing the tax payment and consequently, increasing their tax-free retirement income.
