Basisrente: turning tax into pension

📌The idea in one sentence

You pay money into a retirement contract. That payment comes off your taxable income for the year. The tax you would otherwise have paid stays with you and goes into your pension instead.

In German law this category is called the Basisrente (§ 10 para. 1 no. 2b of the income tax act). You will also hear it called the Rürup-Rente, after the economist who chaired the commission that designed it. Both words mean the same thing, and neither is a brand — it is a legal category that many providers offer contracts within.

It sits in what Germans call the first layer of retirement provision, alongside the state pension. That placement is what earns it the tax treatment, and it is also what explains the restrictions further down this page.

📌How much you can deduct in 2026

The ceiling for the whole first layer is €30,826 for a single person and €61,652 for a married couple assessed together. Since 2023, contributions count in full rather than in the rising percentage steps that applied before.

That ceiling is not additional room on top of what you already pay. If you are an employee, your contributions to the state pension already use part of it — and not only your half. The employer's share counts against the ceiling too, because the whole 18.6 % is treated as retirement provision that has already been favoured.

The €120,000 row stops rising because state pension contributions are capped at the ceiling of €101,400 a year. Above that the deduction room stops shrinking — one of the few places where the German system quietly favours higher earners.

Members of a professional pension scheme (Versorgungswerk) — doctors, lawyers, architects, pharmacists — are in the same position as employees here: those contributions use up the ceiling in the same way.

📌What actually comes back

The deduction is worth whatever your top rate of tax is. That is the number that matters, not the average rate on your payslip. In 2026 the marginal rate reaches 42 % at a taxable income of €69,878 and stays there until €277,825.

Single assessment, no church tax, 2026 tariff. Solidarity surcharge and church tax come on top where they apply, which lifts the figures a little further.

Read the last row carefully. Someone putting €20,000 aside gets €8,400 of it back through the tax return. The deposit is real money out of the account in the year it is paid; the refund arrives later, once the return is filed. Planning for that gap matters more than people expect.

🧾The other half of the deal: tax in retirement

Nothing is being given away. What the deduction does is move the tax from now to later — the pension you eventually draw is taxable income.

How much of it is taxable depends on the year you start drawing. For someone starting in 2026 it is 84 %, and that share rises by half a percentage point a year until it reaches 100 % for anyone starting in 2058 or after.

The reason the arrangement still works is the rate, not the share. Most people are in a higher tax bracket during their working life than they are in retirement, when the salary has stopped and only the pensions remain. You deduct at 42 % and are taxed later at something closer to 20 or 25 %. Where that gap is small — a modest income now, or substantial other income expected later — the case is weaker, and worth working through rather than assuming.

📌The conditions that come with it

The tax treatment is generous because the money is genuinely committed to retirement. These are the rules that make it work:

There is a substantial counterpart. Because the money is committed to retirement, it enjoys protection from creditors and is largely disregarded if you ever need to claim state benefits. For someone self-employed, that protection is a real part of the case rather than a footnote — it is retirement money that stays yours even if a business does not survive.

The practical consequence is simply that this is long-term money, so the question is how much of your saving belongs here and how much belongs somewhere more flexible. That split is different for everyone, and it is exactly what we work out in the first conversation — free, in English, and with your own numbers rather than an example.

📌Who it tends to suit

📌If you are only in Germany for a while

This is the question we get asked most, and the honest answer is that it depends on where you go.

The contract itself survives. It stays in your name, you can leave it paid-up, and the pension is paid to a foreign account when the time comes. What stops is the deduction — you can only set contributions against German tax for as long as you are taxable in Germany.

Who taxes the eventual pension is decided by the double taxation agreement between Germany and wherever you are living then. Some agreements give the right to the country of residence, some leave it with Germany, and a few split it. Germany has more than ninety such agreements and they do not all say the same thing.

The practical consequence: how long you expect to stay changes the answer, and it changes it in both directions. For people staying, the deduction is often the largest single tax saving available to them in Germany. For people leaving within a few years, there are usually better routes, and we will point you at them instead. Either way it is a question worth answering with your own figures — that is a free conversation, in English, and it takes about half an hour.

📌The alternative with the state top-up

There is a second state-supported route, called Riester. It works the other way round: instead of a deduction from taxable income, the state pays money directly into the contract — €175 a year for the saver, plus an allowance for each child. Contributions count up to €2,100 a year.

Riester is aimed at a different group. It works best on lower and middle incomes, and it is especially effective for families, because the child allowances can be worth more than any deduction. The high-earner logic of the Basisrente does not apply here.

Eligibility is the point to check for internationals. Entitlement generally depends on being compulsorily insured in the German state pension, so many self-employed people fall outside it, and there are rules about the allowances if you move away from the EU or EEA. Whether you qualify takes us about two minutes to establish.

Which of the two fits — or whether it is one, both, or a company pension instead — depends on your income, your household and how long you intend to stay. That is what the first call is for, and it costs nothing.