Claim occupational disability insurance as a tax deduction: How to secure benefits
13.06.25
12
Minutes
Katrin Straub
Managing Director at nextsure
Protection against occupational disability is important financial cover. However, many people do not know that contributions to occupational disability insurance can be claimed for tax purposes and that, under certain conditions, pension payments are only taxed to a limited extent. Find out here how to get the most out of it for yourself.
The topic in brief and concise terms
Contributions to disability insurance are deductible as other pension provision expenses up to EUR 1,900 (employees) or EUR 2,800 (self-employed) per year, but this allowance is often already used up by health and long-term care insurance contributions.
Disability pension is generally taxed only on the small taxable portion, the amount of which depends on the age at the start of the pension and the term. [2,3]
A combination of occupational disability insurance (BU) with a Rürup pension can allow higher tax deductions on contributions, but leads to higher taxation of the later pension. [1,4]
Basics: Understanding contributions to occupational disability insurance as pension provision expenses
Contributions to a self-employed occupational disability insurance policy (SBU) count as other retirement provision expenses. You can declare these in your income tax return and thus reduce your taxable income. However, there are annual maximum amounts for other retirement provision expenses. For employees and civil servants, this is EUR 1,900; for self-employed persons who cover their health insurance contributions in full themselves, it is EUR 2,800. In many cases, these maximum amounts are already used up by contributions to basic health and long-term care insurance. Nevertheless, declaring the disability insurance contributions is worthwhile, as statutory framework conditions may change. The exact provisions on this can be found in the Income Tax Act, in particular in § 10 EStG. [1,2] These fundamentals are crucial for understanding the further deduction options.
Maximum tax deductibility: maximum amounts and how to make the most of them in practice
As mentioned, other pension expenses can be claimed for tax purposes up to EUR 1,900 (employees) or EUR 2,800 (self-employed people) per year. This pot includes, in addition to income protection insurance, other policies such as private accident or liability insurance. Contributions to statutory health and long-term care insurance (basic cover) are given priority and often already use up this maximum amount in full. An employee with a monthly gross income of around EUR 2,000 often exceeds the amount of EUR 1,900 with their health and long-term care insurance contributions alone. [2] The tax effect of income protection insurance contributions is then often only theoretical. It is therefore important to check your own situation carefully, as explained in the guide Which insurance policies are tax-deductible. The correct recording of this data is the next step.
Declare correctly: enter disability insurance contributions in your tax return
The contributions to standalone occupational disability insurance belong in the Vorsorgeaufwand supplementary schedule of your income tax return. [2,2] For the 2023 tax year, for example, this should be entered in line 45 under “Contributions to voluntary standalone income and occupational disability insurance policies”. [5,2] Other sources cite line 49 for employees. [1] It is important always to check the latest version of the tax forms or consult a tax adviser. Make sure to state the total annual premium correctly. [3] You will need certificates from your insurance company confirming the premiums paid. Careful documentation and correct entry, as described under where insurance is entered, can secure you possible tax advantages. But not only the contributions, the annuity benefit also has tax implications.
Retirement phase in focus: Taxation of occupational disability pension
If the insured event occurs and you receive an occupational disability pension, this is also taxable. The good news: private occupational disability pensions are generally taxed only on the so-called income component. [2,1] The amount of this income component depends on how old you are when the pension starts and how long the pension is expected to be paid for (remaining term). [3,2] The shorter the remaining benefit period, the lower the taxable income component. [3] For example, the income component for a remaining term of 20 years is 21 per cent. [3,2] This low taxable proportion often means that the actual tax burden on the occupational disability pension is low or even disappears altogether if total income is below the basic tax-free allowance. [1,2] You can also find more details on the calculation in our occupational disability pension tax calculator. A concrete calculation example illustrates this.
Practical example: This is how the taxable portion of your occupational disability pension is calculated
Suppose you become unable to work at the age of 45 and your occupational disability insurance pays you an annuity until the age of 65. The remaining term is therefore 20 years. According to the table, the earnings portion in this case is 21 per cent. [3,2] If you receive a monthly disability pension of EUR 1,500, this results in an annual pension of EUR 18,000. Of this, only 21 per cent is taxable, i.e. EUR 3,780 (EUR 18,000 * 0.21). This amount is then taxed at your personal income tax rate. If this taxable portion is below the annual basic tax-free allowance (for 2025: EUR 11,604 for single persons), no tax is due on the disability pension, provided there are no other income sources. [3,5] A table on taxation based on the earnings portion provides detailed information. There are further optimisation options for special contract arrangements.
Expert knowledge: Tax planning with Rürup BU and co.
One way to optimise your tax position can be the combination of occupational disability insurance with a basic pension (Rürup pension), often referred to as BUZ (supplementary occupational disability insurance). [1,2] Here, contributions can often be deducted to a greater extent as special expenses, as they are treated as retirement provision contributions. [1] In 2023, 100 per cent of contributions to Rürup contracts are tax-deductible up to a maximum of 26,528 euros (single people) or 53,056 euros (married couples). [1] However, the later pension payments from such contracts are subject to higher deferred taxation. [1,4] From 2040, pensions from Rürup contracts will be taxed at 100 per cent. [4] A careful balancing of the greater deduction options during the accumulation phase and the later tax burden when benefits are paid out is necessary, as it is with unit-linked pension insurance policies. Our expert tip summarises the key considerations.
The tax treatment of your disability insurance is a complex topic with many facets. A general recommendation is hardly possible, as the optimum solution depends greatly on your individual situation (employee, self-employed person, level of contributions, other retirement provision expenses, desired level of cover). Take into account both the deductibility of the contributions during the payment phase and the taxation of the pension in the event of a claim. A long-term perspective is essential here. To avoid pitfalls and develop the strategy that is right for you, professional advice, as is also advisable in the case of occupational pension provision, can be very helpful. At nextsure, we will be pleased to help you analyse your insurance situation and identify potential for optimisation.
Summary and call to action
Premiums for occupational disability insurance can be claimed for tax purposes as other retirement-related expenses, with maximum amounts of EUR 1,900 or EUR 2,800, which are often already used up by health and long-term care insurance contributions. The occupational disability pension itself is usually taxed only on the small taxable portion of the income, which often results in a low tax burden or no tax at all. [2,1] A careful review of your personal situation and correct declaration in your tax return are important. We are available to provide a comprehensive analysis of your cover and to help optimise your policies. Request your individual risk analysis now: Have your insurance situation reviewed free of charge and receive concrete recommendations for optimisation.
More useful links
Federal Ministry of Finance provides detailed information on Section 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 "Number of the Week" series.
Federal Institute for Occupational Safety and Health (BAuA) provides figures, data and facts on the costs of incapacity for work.
FAQ
Can I always deduct my disability insurance from tax?
In principle, yes, the contributions count as other precautionary expenses. However, there are maximum amounts (EUR 1,900 for employees, EUR 2,800 for self-employed people), which are often already reached by health and long-term care insurance contributions, meaning that the disability insurance contributions no longer have a tax-reducing effect.
What is the tax rate on my disability pension?
The private disability pension is taxed only on the taxable portion. This share (e.g. 21% with 20 years remaining term) is then taxed at your personal income tax rate. If taxable income is below the tax-free allowance, no tax is due. [3,2]
What is the difference between the tax deductibility of a SBU and a BUZ with Rürup?
Contributions to a standalone BU (SBU) are only deductible to a limited extent as other retirement provision expenses. Contributions to a BUZ as part of a Rürup pension can be deducted to a significantly greater extent as retirement provision expenses, but the Rürup pension is taxed more heavily later on. [1,4]
Which documents do I need for my tax return regarding my occupational disability insurance?
You need the annual certificate from your insurance company for the contributions paid towards disability insurance. This shows the amount you can enter in the annex for pension expenses.
Do I have to pay social security contributions on my occupational disability pension?
In general, no social security contributions are payable on pensions from private occupational disability insurance. However, for 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 occupational disability pension change while it is being received?
No, the income portion determined once for your private disability pension remains the same for the entire term of pension payments. However, your personal tax rate can change if your total income changes. [5]
