Claiming tax relief for occupational disability: How to secure benefits
13 Jun 2025
8
Minutes
Katrin Straub
CEO at nextsure
Income protection insurance is an important financial safeguard. However, many people do not know that contributions to disability insurance can be tax-deductible and that pension payments are only lightly taxed under certain conditions. Find out here how to make the most of it for yourself.
The topic in brief and concise terms
Contributions to disability insurance can be deducted as other precautionary expenses up to 1,900 euros (employees) or 2,800 euros (self-employed) annually, but are often already exhausted by health and care insurance contributions.
The disability pension is generally only taxed with the low income portion, the amount of which depends on the age at the start of the pension and the duration. [2,3]
A combination of disability insurance with a Rürup pension can allow for higher contribution deductions but leads to higher taxation of the future pension. [1,4]
Basics: Contributions to occupational disability insurance as preventative expenses
The contributions to an independent occupational disability insurance (SBU) are considered other provident expenses. You can declare these in your income tax return to reduce your taxable income. However, there are annual maximum amounts for other provident expenses. For employees and civil servants, this is 1,900 euros, and for self-employed individuals who fully bear their health insurance contributions, it is 2,800 euros. Often, these maximum amounts are already exhausted by contributions to basic health and long-term care insurance. Nevertheless, declaring the BU contributions is advisable, as statutory conditions can change. The exact regulations on this can be found in the Income Tax Act, particularly in § 10 EStG. [1,2] These foundations are crucial for understanding further deduction possibilities.
Maximum Deducibility: Limits and Their Utilisation in Practice
As mentioned, other precautionary expenses can be claimed for tax purposes up to 1,900 euros (employees) or 2,800 euros (self-employed) per year. In addition to occupational disability insurance, other insurances such as private accident or liability insurance are included in this category. Contributions to statutory health and long-term care insurance (basic coverage) are primarily taken into account and often already fully exhaust this maximum amount. An employee with a monthly gross income of around 2,000 euros often exceeds the amount of 1,900 euros with their health and long-term care insurance contributions. [2] As a result, the tax impact of the occupational disability contributions is often only theoretical. Therefore, it is important to carefully assess your own situation, as explained in the guide Which insurances are deductible. The correct recording of this data is the next step.
Correctly declare: Enter disability insurance contributions in the tax return
Contributions to the self-employed disability insurance belong in the section for pension expenses in your income tax return. [2,2] For the 2023 tax year, this is to be entered, for example, in line 45 under “Contributions to voluntary independent earnings and disability insurance”. [5,2] Other sources mention line 49 for employees. [1] It is important to always check the latest version of the tax forms or consult a tax advisor. Ensure that you state the total annual contribution correctly. [3] You will need the certificates from your insurance company for the contributions paid. Careful documentation and correct entry, as described under Where to enter insurance, secures potential tax advantages for you. But it's not only the contributions that have tax aspects; the pension benefits do too.
Focus on the retirement phase: Taxation of disability pensions
When the situation arises where you receive a disability pension, it is also subject to tax. The good news: Private disability pensions are usually taxed only on what is known as the earnings portion. [2,1] The amount of this earnings portion depends on how old you are when the pension starts and how long the pension is expected to be paid (remaining term). [3,2] The shorter the remaining term, the lower the taxable earnings portion. [3] For example, the earnings portion for a remaining term of 20 years is 21 percent. [3,2] This low tax portion often means that the actual tax burden on the disability pension is low or even eliminated if the total income is below the basic allowance. [1,2] You can find more details about the calculation in our disability pension tax calculator. A concrete example illustrates this.
Practical Example: This is how the income portion of your disability pension is calculated
Let’s assume you become unable to work at the age of 45, and your disability insurance provides you with a pension until you reach 65. This results in a remaining term of 20 years. According to the table, the taxable portion in this case is 21 percent. [3,2] If you receive a monthly disability pension of 1,500 euros, this amounts to an annual pension of 18,000 euros. Only 21 percent of this is taxable, which is 3,780 euros (18,000 euros * 0.21). This amount is then taxed at your personal income tax rate. If this taxable portion is below the annual basic allowance (for 2025: 11,604 euros for single persons), no taxes are due on the disability pension provided there are no other sources of income. [3,5] A table on the taxation of yield portions provides detailed information. There are further optimization possibilities for specific contract arrangements.
Expert Knowledge: Tax Planning through Rürup-BU and Co.
One option for tax optimisation may be combining an occupational disability insurance with a basic pension (Rürup pension), often referred to as BUZ (Berufsunfähigkeitszusatzversicherung). [1,2] Here, contributions can often be deducted more extensively as special expenses, as they are considered retirement provisions. [1] In the year 2023, 100 percent of contributions to Rürup contracts are deductible up to a maximum amount of 26,528 euros (single) or 53,056 euros (married). [1] However, the subsequent pension payment from such contracts is subject to higher deferred taxation. [1,4] From 2040, the pension from Rürup contracts will be taxed at 100 percent. [4] A careful consideration is necessary between higher deduction possibilities during the accumulation phase and the later tax burden during the benefit phase, as is the case with unit-linked pension insurances. Our expert tip summarises the most important considerations.
Our expert tip: Long-term planning and consultation are crucial
The tax treatment of your occupational disability insurance is a complex topic with many aspects. A general recommendation is hardly possible, as the optimal solution strongly depends on your individual situation (employee, self-employed, contribution amount, other pension expenses, desired level of cover). Consider both the deductibility of contributions during the contribution phase and the taxation of the pension in the event of a claim. A long-term perspective is crucial here. To avoid pitfalls and develop the right strategy for you, professional advice, which is also useful in company pension schemes, can be very helpful. We at nextsure are happy to assist you in analysing your insurance situation and identifying potential for optimisation.
Summary and Call to Action
More useful links
Federal Ministry of Finance provides detailed information on § 10 of the Income Tax Act, which deals with special expenses.
Federal Ministry of Finance provides information on Annex 22a/I, which is relevant for tax regulations.
German Pension Insurance offers a collection of statistics and reports on pension insurance.
German Pension Insurance provides specific statistics on disability pensions over time.
Federal Statistical Office publishes press releases, including the series "Number of the Week".
Federal Institute for Occupational Safety and Health (BAuA) provides figures, data, and facts regarding the costs of work absenteeism.
FAQ
Can I always deduct my disability insurance from taxes?
In principle, yes, the contributions are considered as other pension expenses. However, there are maximum amounts (€1,900 for employees, €2,800 for self-employed) that are often already reached by health and nursing care insurance contributions, meaning the disability insurance contributions no longer have a tax-reducing effect.
What is the tax rate on my disability pension?
The private disability insurance pension is only taxed on the yield portion. This portion (e.g., 21% with a remaining term of 20 years) is then taxed at your personal income tax rate. If the taxable income is below the basic allowance, no taxes are incurred. [3,2]
What is the difference between the deductibility of an SBU and a BUZ with Rürup?
Contributions to an independent occupational disability insurance (SBU) can only be deducted to a limited extent as other precautionary expenses. Contributions to an occupational disability insurance as part of a Rürup pension can be deducted to a significantly higher extent as retirement provision expenses; however, the Rürup pension will be taxed at a higher rate later. [1,4]
What documents do I need for the tax return regarding my disability insurance?
You require the annual certificate from your insurance company detailing the contributions paid for disability insurance. This document indicates the amount you can enter in the Pension Expenses section.
Do I have to pay social security contributions on my disability pension?
Pensions from private occupational disability insurance generally do not incur social security contributions. However, with disability pensions from an occupational pension scheme or certain Rürup arrangements, contributions to health and long-term care insurance may be due.
Does the tax treatment of the disability pension change during receipt?
No, the determined income share for your private disability income pension remains the same for the entire duration of the pension payments. However, your personal tax rate may change if your total income changes. [5]
