Tax deductions for pension and health insurance

33 posts in this topic

I would like to understand how much of what we pay for pension, health insurance, and other insurances can actually be deducted (offset) from our income for tax purposes. I've read the explanation in German but the amounts don't match the estimate I got from my tax accountant, and she doesn't seem to be able to explain why. Can anyone help?

 

As I understand it (from this website: http://www.steuertipps.de/lexikon/vorsorgeaufwendungen ), in 2009 68% of regular, statutory pension contributions are tax deductible, as long as they don't exceed 40,000 euros for a married couple or 20,000 euros for a single person. So if the total pension contributions are P then we should be able to deduct .68(min(P,40000)), right?

 

For other expenses what I understand is that in 2009 other insurance costs (like health insurance) seem to be deductible up to 1500 euros for employees and up to 2400 for freelancers. So if I'm a freelancer and paid F for health insurance and my husband is an employee and paid E for health insurance then we should be able to deduct min(1500,E) + min (2400,F), right?

 

But when I take them together .68(min(P,40000)) + min(1500,E) + min (2400,F) the number I get out is about 30% higher than the number the tax accountant estimated for Vorsorgeaufwendungen.

 

Anyone have any ideas what I did wrong? Could it be that only part of our health insurance costs count as we have private plans not statutory insurance?

 

I know that this doesn't matter as the tax office will just calculate it themselves, but I would really like to understand where the numbers come from.

 

I'd also love to know how these calculations will change for 2010. As I understand it from this website: ( http://www.steuertipps.de/?softlinkID=14367 ) the percent of pension that's deductible will increase to 70% and more of the health insurance will be deductible (with the limits increasing to 1900/2800 for employees/freelancers). Or are the changes more complex than that?

0

Share this post


Link to post
Share on other sites

questions for clarification: did you actually pay into the German public pension system as a freelancer any voluntary contributions? I.e. how much of the up-to-20k did you pay in?

 

Cheerio

I am a professional independent insurance broker, financial adviser, and authorised advertiser. Contact me.
0

Share this post


Link to post
Share on other sites

Yes, as a freelancer I did pay into the pension system in 2009. I don't think it was voluntary though, as the pension office sent me a bill and said I owed them. I think because I only work for one company at the moment it wasn't voluntary? The amount I paid was much less than the limit of 20000 euros.

 

Note that the pension office did give me an exemption for the next three years. But the exemption isn't retroactive, so I had to pay in for 2009. I was surprised, however, because the bill was lower than I expected. I expected to pay about 20% of my income as a pension contribution, but the bill they sent me was less than half that. I don't know why, and I'm a little worried that they'll come back soon and tell me I owe them thousands of euros. But that's another post...

0

Share this post


Link to post
Share on other sites

Regarding the health insurance deductions in 2010 I did a little more research. It looks like if you have a private plan then in 2010 you'll get a breakdown from the insurance company that says how much of your premium is to pay for "basic care", i.e. what you'd get from statutory insurance, and how much of your premium is for "extra special" care like head doctor, private hospital room etc.

 

I think the basic care amount is 100% deductible, no matter how much you paid for it? But the "extra special" amount is only deductible up to the difference between the ceiling and the basic care. In other words, if you're self-employed then the 2010 ceiling is 2800 euros a year.

 



  • If you paid 3500 euros for basic care and 500 euros for special services then you can deduct only 3500 euros. The extra 500 is not deductible because you've exceeded the 2800 euro limit already.
  • If you paid 2000 euros for basic services and 500 euros for special services then you can deduct all 2500.
  • If you paid 2500 euros for basic services and 500 euros for special services then you can deduct only 300 of the special costs for a total of 2800 euros.

 

 

Can anyone confirm that I understand this correctly? I got it from this page: http://translate.googleusercontent.com/translate_c?hl=en&sl=de&u=http://www.hallesche.de/h_index/h_ks_faq/h_ks_faq_steuervorteil.htm&prev=/search%3Fq%3DVorsorgeaufwendungen%2BSelbstbehalt%26hl%3Den%26prmd%3Div&rurl=translate.google.de&twu=1&usg=ALkJrhh8iYkzFyKVs_x4Poas-bnSRrr5ng#welche-beitraege

 

Of course, for 2009 I am still confused as I don't think any of these complications apply.

0

Share this post


Link to post
Share on other sites

As an employee one can only deduct 1500 Eur out of compulsory health insurance? I don't think that even covers half a year in my case :(

 

It seems to me that the limit should be increased, if the taxes are supposed to tax what one earns (and that is why we are allowed to deduct sensible expenses related to work, particularly so for self-employed people) with compulsory krankenkasse in the hundred of Euros I would think that they wouldn't tax the part of your salary that automatically goes for paying it.

 

So I would figure that the basic, compulsory amount is deductible like captious suggests above (or does that apply only to self-employed)?

 

Am I misunderstanding something?

Ivo.

0

Share this post


Link to post
Share on other sites

I just wanted to update this thread with a little more information based on the tax assessment for 2009 that I recently received from the tax office. For a married couple in which one is an employee and one a freelancer, it appears that they calculated the deductible portion as follows. Assume x is what I paid in pension and y is what my husband paid in pension insurance (and an equal amount was contributed by his employer). The deductible portion is: (0.68*(x+2y))-y

 

For the portion of deductible health insurance and other insurances they subtracted a lump amount of 3900 euros (2400 for me and 1500 for my husband).

1

Share this post


Link to post
Share on other sites

 

information based on the tax assessment for 2009. Assume x is what I paid in pension and y is what my husband paid in pension insurance (and an equal amount was contributed by his employer). The deductible portion is: (0.68*...

This percentage will rise each year. It was 68% in 2009, 70% in 2010, will be 72% in 2011 and so on, up till 100% from 2025.

 

On the other hand, this runs apace with the rising percentage of pension taxation.

So if for example, you start receiving a pension in 2011 you only have tax 60% of it (it will remain fixed at 60% for you in all the years after that). This percentage rises steadily (2% each year) and if, for example, somebody only starts receiving a pension in 2040 he/she will have to tax 100% of it in continuity, but at least they will have been able to deduct a rising part of their contributions to that pension in all the years leading up to their retirement (= nachgelagerte Besteuerung = deferred taxation).

 

You can see this development in the following table (source):

 

post-24869-13036747159492.jpg

 

 

For the portion of deductible health insurance and other insurances they subtracted a lump amount of 3900 euros (2400 for me and 1500 for my husband).

 

That were the allowances for 2009, 1,500€ for employees and 2,400€ for the self-employed. However, these allowances had to cover all insurance payments, bad luck for you if your health insurance was more expensive than that.

 

******************************************************

 

 

Regarding the health insurance deductions in 2010 I did a little more research. It looks like if you have a private plan then in 2010 you'll get a breakdown from the insurance company that says how much of your premium is to pay for "basic care", i.e. what you'd get from statutory insurance, and how much of your premium is for "extra special" care like head doctor, private hospital room etc.

 

I think the basic care amount is 100% deductible, no matter how much you paid for it? But the "extra special" amount is only deductible up to the difference between the ceiling and the basic care. In other words, if you're self-employed then the 2010 ceiling is 2800 euros a year.

 



  • If you paid 3500 euros for basic care and 500 euros for special services then you can deduct only 3500 euros. The extra 500 is not deductible because you've exceeded the 2800 euro limit already.
  • If you paid 2000 euros for basic services and 500 euros for special services then you can deduct all 2500.
  • If you paid 2500 euros for basic services and 500 euros for special services then you can deduct only 300 of the special costs for a total of 2800 euros.

 

Can anyone confirm that I understand this correctly?

Yes, I can confirm it.

 

From 2010 on you are allowed to claim more (it was changed with the Bürgerentlastungsgesetz):

 

  • if you have public health insurance: all of your health insurance and Pflegepflichtversicherung (compulsory nursing insurance) payments
  • if you have private health insurance: the whole amount health insurance and Pflegepflichtversicherung which corresponds to "basic", i.e. public cover. Your private health insurance company will send you every year a "Bescheinigung über Vorsorgeaufwendungen nach §10 Abs. 1 Nr. 3 EStG" in which you will find the figures which correspond to that "basic" cover.

 

So no matter how much you paid for health insurance and nursing insurance, you are now allowed to deduct all of it which amounts to "basic" cover.

 

You are also allowed to deduct your contributions that exceed "basic" cover for health&nursing, Anwartschaften (i.e. if you paid your health insurance company a monthly fee to keep your place with them open so that they have to take you back as a customer once you want to have again health insurance cover from them - usually done if people leave Germany for a time), or unemployment, or liability, or accident or life insurance, with the restriction that you will only be allowed to deduct up to the allowance of:

 

  • 1,900€ per year for employees, pensioners, Beamte, pensioned Beamter, and non-employed spouses covered under spouse's public health insurance
  • 2,800€ per year for the self-employed, non-employed spouses that have private health insurance, and spouses of Beamter (= Partner von Beamten ohne eigenen Beihilfeanspruch)

 

The problem is that when calculating the free space you still have under those new allowances, they also add whatever you paid that year for "basic" health&nursing insurance, so that only people who paid very little for their health insurance will still have space left under those rules.

 

You can read more about it here, which is also the source of these two examples (Mr. Meier has an allowance of 2,800€):

 

post-24869-13036732890699.jpg

2

Share this post


Link to post
Share on other sites

Right, I really, really want to get these tax returns done. I thought I nearly had it but I'm stuck on where to put my Zahnzusatzversicherung and, after reading this and (part of) the other big filing your tax returns thread, I'm also unsure about what exactly I need to enter.

 

So, I'm just a standard employee with a gesetzliche Krankenversicherung. I also have a Zahnzusatzversicherung.

 

Question 1: in the tax return for 2012, Anlage Vorsorgeaufwand, I have entered what was on my Lohnsteuerbescheinigung (Nr. 25) in row 12. Row 13 is indented and says "Beiträge zu Krankenversicherungen, die als Zusatzbeitrag geleistet wurden" and I would have assumed that I enter the amount of the premiums I have paid there. But row 19 says the same thing (except it's not indented). So which do I fill in? And I assume I need to contact Ergo to get a confirmation of premiums paid sent to me (don't think I've gotten one at any rate).

 

Question 2: having read a bit in the existing threads about health insurance I'm now also wondering if I need to enter not only premiums paid but also the amounts I received from Ergo, which would mean also detailing the amounts I've paid to the dentist. I was just going to keep it simple this time round and just worry about the premiums. Do I have to also show what I've spent on treatment and what refunds I've received for those bills? Not sure if the existing discussions applied just to 'ordinary' private health insurance or to things like Zahnzusatz as well.

 

Thanks.

0

Share this post


Link to post
Share on other sites

First off, was the amount that was on your Lohnsteuerbescheinigung (Nr. 25) higher than 1,800€?

If yes, then you can stop right now, since for employees there is a 1,800€ cap (only the public health insurance itself is allowed to cost more).

 

If not, then you still have space under that cap of 1,800€, to be exact you are still allowed to claim (1,800€ - amount_Nr.25) for other insurances, and then it makes sense to read the following.

 

 

Row 13 is indented and says "Beiträge zu Krankenversicherungen, die als Zusatzbeitrag geleistet wurden" and I would have assumed that I enter the amount of the premiums I have paid there.

 

No, that would be for the Zusatzbeiträge that public health insurances, who can't manage with the funds that they are allotted, ask for additionally.

As far as I know, only very few public health insurances are actually charging Zusatzbeiträge, have a look on this list to see whether yours is among them.

 

 

But row 19 says the same thing (except it's not indented). So which do I fill in? And I assume I need to contact Ergo to get a confirmation of premiums paid sent to me (don't think I've gotten one at any rate).

 

While line 13 was about public health insurance for employees, this is about the public health insurances all other groups (e.g. pensioners, people who don't work, ...) pay.

Don't fill in anything here.

 

 

Question 2: having read a bit in the existing threads about health insurance I'm now also wondering if I need to enter not only premiums paid but also the amounts I received from Ergo, which would mean also detailing the amounts I've paid to the dentist. I was just going to keep it simple this time round and just worry about the premiums. Do I have to also show what I've spent on treatment and what refunds I've received for those bills? Not sure if the existing discussions applied just to 'ordinary' private health insurance or to things like Zahnzusatz as well.

 

This is about the fact that private health insurances give you rewards for good behaviour.

So, if for example, you are a non-smoker, some give you a 50€ bonus each year.

 

This is not about the money the insurance reimbursed you for dental treatment that you had.

Nobody cares about that.

 

So, if you got such a non-smoker bonus or another bonus, you are not allowed to simply claim for the insurance premiums, but you first have to deduct the bonus amount that you got from them.

 

Example:

 

  • 240€ that you paid in 2012 for your ERGO Zahnzusatzversicherung in insurance premiums
    - 50€ bonus you got from ERGO since you do not smoke
    __________
    = 190€ is the amount that you are allowed to claim for.

 

The amount that you are allowed to claim for your private dental ERGO Zusatzversicherung should go into line 35 of the Anlage Vorsorgeaufwand.

 

You don't need a Bescheinigung from ERGO, that is only needed for full-scale private health insurances that people have instead of public health insurance.

0

Share this post


Link to post
Share on other sites

Thanks a million for the clear answer (I even work with many, many Steuerberater but unfortunately, once you move away from the corporate side of things they get a bit clueless and were no help). I'm over the 1,800 so I'll just leave it so. But good to know where to find it if I needed it.

 

Can I ask one other thing, though? Loads of people, including my GP's receptinist, have told me that I should submit all of my receipts for all medical expenses, including the (now obsolete) Praxisgebühr because even if I don't have enough to make it worthwhile, it's better to fill it all in than not. But where would I fill direct medical expenses in if I wanted to?

0

Share this post


Link to post
Share on other sites

That's about the "außergewöhnliche Belastung" (= extraordinary burden, i.e. an amount that, if you have to pay it entirely out of your own pocket would pose a hardship to you).

However, this is only about money you end up being out of pocket for, not about amounts the private insurance reimbursed you for.

 

You claim for it by filling in the total amount into:

 

 

Only the amount that exceeds your individual "zumutbare Belastung" will become tax deductible.

If you are single and earn up to 51,130 gross a year, then 6% of your gross salary are your "zumutbare Belastung" (= the amount they think you can pay out of your own pocket without it being a hardship to you), so, for example, if you earn 40,000€ a year gross then the first 2,400€ of your medical expenses will have no effect at all.

 

Please see this table for the percentages for the "zumutbare Balastung", depending on your marital/procreational status

0

Share this post


Link to post
Share on other sites

Thanks again. It's good to know. I probably came close in 2010 (before I had the Zahnzusatzversicherung in place) but getting a payout from my company's "Beihilfe" would have taken me just under the limit again, I think. Still, it's another two and a half years before the full 90% coverage of the insurance comes into effect so it's good to know in case anything else happens before then :)

0

Share this post


Link to post
Share on other sites

Oops, typo in post 10, the correct version should read:

 

 

  • First off, was the amount that was on your Lohnsteuerbescheinigung (Nr. 25) higher than 1,900€?
    If yes, then you can stop right now, since for employees there is a 1,900€ cap (only the public health insurance itself is allowed to cost more).

    If not, then you still have space under that cap of 1,900€, to be exact you are still allowed to claim (1,900€ - amount_Nr.25) for other insurances, and then it makes sense to read the following.

 

0

Share this post


Link to post
Share on other sites

I was playing with the income tax calculator at parmentier.de and am a bit confused about the deductions.

I am assuming class 1, no children, no church tax, 15.5% health insurance.

From what I understand, for 2013, you are allowed to deduct

 

(0.76*2-1)*pension contribution+max(min(all insurance contributions,1900),health+nursing care insurance contributions).

 

Upto, 15830 in yearly wage he seems to be saying the deduction is

12% of wage+0.52*pension contribution.

 

Then upto 20700 its

1900+0.52*pension contribution (1900=0.12*15830=0.09178*20700)

 

Then upto 47250 its

9.178% of wage+0.52*pension contribution (kranken+pflege insurances hit the cap at this point)

 

How is he arriving at 12% for the first part? The deduction doesn't seem to change if you say you have children but the nursing care insurance contribution goes down.

 

How is he arriving at 9.178% for the kranken+pflege insurance contribution?

0

Share this post


Link to post
Share on other sites

If you're 23 or older and have no kids --> the employee's share in 2013 for public nursing insurance was: 1.025% + 0.25% = 1.275%

Employee's share in 2013 for public health insurance was: 8.2%

 

Now to calculate the deductible part of your public pension insurance.

 

First off, Mr. Parmentier uses an outdated public pension rate of 19.9%, if you look here, it really was 18.9% in 2013, half (9.45%) paid by the employer, half (9.45%) by the employee.

 

If you have a look at the blue table in post 7, you will see that 76% of them were tax deductible in 2013 (the percentage rises by 2% each year).

However, they don't calculate it by simply multiplying your pension contribution by 76%.

 

The correct way to calculate how much you are allowed to deduct is explained here, basically they first calculate the amount of the permitted 76% deduction, but then, instead of taking the half of that because you as an employee contributed half, they deduct the full half of your employer (because he does get to deduct that entire half = 50% as a business expense!), which means that you are only left with 26% of the total pension contribution (i.e. 52% of what you really paid as your public pension contribution, i.e. 0.52 x 0.0945 x gross_salary):

 


  • 0.76 x 0.189 x gross_salary - 0.5 x 0.189 x gross_salary = 0.04914 x gross_salary = 4.914% of your gross salary

 

 

So, in total the following is deductible for 2013:

 

 

  • 8.2% x gross_salary: public health
    + 1.275% x gross_salary: public nursing
    + any insurance up to 1,900€ (e.g. unemployment insurance) if you haven't already spent that much on health&nursing
    + 4.914% x gross_salary: public pension
    __________________________________________________________
    = total deduction

 

0

Share this post


Link to post
Share on other sites

Thanks for the clarifying explanation. So I did get it right. I wonder how he's coming up with 12% and 9.178%. Is there some "official" wage/income tax calculator?

0

Share this post


Link to post
Share on other sites

The official income tax calculator is this one: https://www.bmf-steuerrechner.de/

It only calculates tax deductions (income tax, solidarity payment, to a limited extent church tax); not pension/health/nursing/unemployment insurance.

1

Share this post


Link to post
Share on other sites

Am on the run, so only a short answer.

 

If you add (applicable for low salaries) unemployment insurance of 1.5% because you still have space left until 1,900€, then you reach those 12%.

 

For high salaries, health&nursing is capped (so are pension&unemployment for even higher salaries), i.e. the more you earn the less a percentage it represents of your whole gross salary. Google Beitragsbemessungsgrenze.

0

Share this post


Link to post
Share on other sites

As you say for low salaries it should be health+nursing care+unemployment (but 8.2+1.275+1.5=10.975 and not 12)

 

At some point the 3 combined will reach 1900. From this point on the deduction is 1900.

 

At a second point health+nursing care cross 1900. From this point the deduction is just health+nursing care (but 8.2+1.275=9.475 and not 9.178).

 

Beyond 47250 health+nursing are fixed.

 

After accounting for the pension being 9.45%, the official calculator is giving the same results as Parmentier's.

 

I am afraid I am missing something and would appreciate it if you can explain in detail when you get the time.

0

Share this post


Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!


Register a new account

Sign in

Already have an account? Sign in here.


Sign In Now