Taxation of private disability insurance pension: Tables and practical examples for your clarity
24 May 2025
4
Minutes
Katrin Straub
CEO at nextsure
Taxation of your private occupational disability pension (BU pension) often seems complex. However, with the right understanding of the yield component regulation and a look at the current table, you can save real money. This article explains the details and shows you how it's done.
The topic in brief and concise terms
The taxation of a private occupational disability pension only applies to the small proportion of yield, which is determined by the remaining term and often falls below the basic tax allowance.
A specific table in § 55 EStDV lists the exact income shares for the taxation of the private disability insurance pension.
Disability insurance pensions from Rürup contracts or occupational pensions are generally taxed much higher in the event of a claim than private disability insurance pensions.
Quick Facts: The most important information about the taxation of disability insurance pensions
The taxation of private disability pensions (third tier) is based on the yield share. Often, this share is lower than the annual basic allowance of, for example, over eleven thousand euros.
Crucial for the yield share is the remaining term of your pension at the time it commences. A special table in the Income Tax Implementation Regulation (§ 55 EStDV) lists the exact percentages.
Contributions to private disability insurance can be claimed as other pension expenses. However, the maximum amount is often already exhausted by health and long-term care insurance contributions.
In addition to private disability pensions, there are disability protections through the basic pension (Rürup) or occupational pension schemes. These are subject to different, usually higher, tax burdens when benefits are paid out.
Understanding the revenue share table in detail
The central role in the taxation of your private disability pension is played by the yield portion rule. The legislator assumes that your pension payment includes an interest portion, and only this is taxable. The amount of this yield portion is determined by the anticipated duration of the pension.
The shorter the remaining term of your disability pension, the lower the taxable yield portion. You can find the exact values in the table of § 55 paragraph two of the Income Tax Implementation Regulation (EStDV). Here is an excerpt:
Remaining term 1 year: zero percent yield portion
Remaining term 5 years: five percent yield portion
Remaining term 10 years: twelve percent yield portion
Remaining term 15 years: sixteen percent yield portion
Remaining term 20 years: twenty-one percent yield portion
Remaining term 25 years: twenty-six percent yield portion
Remaining term 30 years: thirty percent yield portion
Remaining term 37 years: thirty-six percent yield portion
This table forms the basis for calculating the taxable part of your disability pension. A suitable calculator can provide initial guidelines here. The precise application of this table is crucial for your tax burden.
Practical examples: How the profit share affects
Theory is good, practice is better. Let us consider two examples regarding the taxation of a private disability insurance pension. Suppose the annual basic allowance is eleven thousand six hundred and four euros (as of 2024, this may change).
Example one: A person becomes incapacitated for work at the age of 47 and receives a monthly disability pension of two thousand euros. The pension runs until the age of 67, which means another twenty years. According to the table, the revenue portion for a remaining term of twenty years is twenty-one percent. This means: 2,000 euros x 21% = 420 euros. Annually, that amounts to 5,040 euros (420 euros x 12). This amount is below the basic allowance. Therefore, in this case, no income tax is due on the disability pension, provided there are no other significant sources of income.
Example two: A person becomes incapacitated for work at the age of 30, with the pension running until age 67 (remaining term 37 years). The revenue portion is thirty-six percent. With a disability pension of 2,500 euros per month, this equates to a taxable portion of 900 euros (2,500 euros x 36%). Annually, this results in 10,800 euros (900 euros x 12). This amount is also below the assumed basic allowance of 11,604 euros. The knowledge about the tax liability of the disability pension is crucial here. These examples illustrate how the taxation of the private disability insurance pension table works in practice.
Expert Depth: Legal Foundations and Special Cases
The legal basis for the taxation of the private occupational disability pension (third pillar) is formed by § 22 number one sentence three letter a double letter bb of the Income Tax Act (EStG) in conjunction with § 55 of the Income Tax Implementation Ordinance (EStDV). This regulates the application of the yield share for shortened life annuities, which includes the occupational disability pension.
Our expert tip: Pay attention to the so-called performance dynamics. If your occupational disability pension increases annually in the event of a claim to offset inflation, this increase is often fully taxable, not just with the yield share.
What happens with additional income? If you have additional income besides the occupational disability pension, for example, from renting and leasing or a statutory reduced earning capacity pension, these are added together with the yield share of the occupational disability pension. If the total exceeds the basic allowance, taxes will be incurred. Information on compulsory health insurance is also relevant. Correct declaration in the tax return is essential here.
Correctly indicate the disability pension in the tax declaration
The received private occupational disability pension belongs in Schedule R (pensions and other benefits) of your income tax return. There, you enter the gross annual pension and the taxable yield. The insurance company usually provides you with a certificate containing the necessary figures for the tax office.
Contributions to an independent occupational disability insurance can be entered in Schedule Vorsorgeaufwand as 'other miscellaneous provisions' (e.g., line 45 or 47, depending on the tax year). However, the deduction is limited to maximum amounts (e.g., 1,900 euros for employees), which are often already reached through contributions to health and nursing care insurance. Therefore, a tax deductibility of the BU contributions is often only partially possible for many in practice. Nevertheless, correct declaration is important.
The following points must be considered in the tax return:
Use Schedule R for pension income.
Correctly determine and enter the yield share.
Have the certificate from the insurer ready.
Check contributions in Schedule Vorsorgeaufwand.
Careful preparation of your tax return ensures you possible benefits. The question of which insurances are deductible is a bigger issue.
Comparison: Private disability insurance pension versus Rürup disability insurance and bAV disability insurance
In addition to the private disability pension (third tier), there is the option to combine occupational disability insurance with a Rürup pension (basic pension, first tier) or an occupational pension scheme (bAV, second tier). The tax treatment at the time of benefit payment differs significantly.
For a disability pension from a Rürup policy, the taxable portion increases annually. For a pension starting in 2023, it would be, for example, eighty-three percent, and by 2040 (or later, depending on legislative developments), it will be one hundred percent. However, the contributions are more tax-deductible during the accumulation phase.
A disability pension from occupational pension schemes is generally fully taxable at the time of payment, similar to employment income. However, during the accumulation phase, contributions are often exempt from social security and tax. The private disability pension is usually the most tax-efficient option at the time of payment. This also affects whether the private disability pension counts as income with the health insurance.
Use optimisation tips and professional advice
To optimise the taxation of your private disability insurance pension, there are a few points to consider. Having a precise understanding of the current earning rates table and the basic allowance is the first step. Check annually whether allowances or tax regulations have changed.
Document all relevant insurance documents and consult with a tax advisor. They can best assess your individual situation and consider all sources of income. Early and accurate planning can secure you significant tax advantages.
Our expert tip: When taking out disability insurance, the pension amount should be calculated so that it covers your needs even after possible deductions for taxes and health insurance. A gross pension that is about twenty percent higher with Rürup or occupational pension schemes may be necessary to achieve the same net income as with a private disability insurance. Find more on insurance and tax on our blog. The complexity of the matter highlights the value of individual consultation.
Request an individual risk analysis now: Have your insurance situation reviewed free of charge and receive concrete optimisation suggestions.
More useful links
The Federal Ministry of Finance offers a document on the taxation of annuities, explaining important legal fundamentals.
Another document from the Federal Ministry of Finance highlights the tax incentives for private retirement provision.
Haufe provides an article on pensions from private pension insurance that contains relevant information for taxation.
Also from Haufe is a contribution about pensions from private insurance, offering deeper insights.
Steuertipps.de informs about the tax exemption of private pensions from tax-advantaged old contracts with capital option rights.
The yield-portion table is explained in detail on Steuertipps.de, which is relevant for calculating disability pensions.
The German Pension Insurance offers a definition of the yield portion in its glossary.
Steuern.de provides guidance on filling in Section R of the tax return where pension earnings must be recorded.
Lohnsteuer-kompakt.de discusses the tax exemption of pensions from contracts before 2005 and possible risks.
Wikipedia offers a general overview of disability insurance.
FAQ
What does the term 'Ertragsanteil' mean in the taxation of private disability insurance pensions?
The profit portion is the part of your private occupational disability pension that is considered as interest income and therefore must be taxed. Its amount is regulated in § 55 EStDV and depends on the expected remaining term of your pension.
How is the private disability insurance pension reported in the tax return?
The private occupational disability pension is entered in Annex R of your tax return. Contributions to the occupational disability insurance can be claimed in Annex Vorsorgeaufwand, with maximum limits to be observed.
What role does the basic allowance play in the taxation of occupational disability pensions?
The basic tax-free allowance is an annual amount up to which no income tax must be paid (e.g., €11,604 for singles in 2024). If the taxable share of your disability pension (possibly plus other income) is below this allowance, your pension payments remain effectively tax-free.
Are increases in my disability insurance pension (performance dynamics) also only taxable with the profit portion?
No, increases resulting from an agreed performance dynamic in the event of a claim are generally fully taxable and not only subject to the original yield portion.
Are there differences in the taxation between private occupational disability pensions and disability pensions from occupational pension schemes or Rürup?
Yes, significantly. Private disability insurance (BU) pensions are only taxed on the small profit portion. BU pensions from occupational pensions (bAV) are usually fully taxable, and with Rürup BU, the taxable portion increases to full taxation.
Where is the table of profit shares for private disability insurance pension legally anchored?
The definitive table for the profit share in the case of temporally limited annuities, such as the private disability pension, can be found in § 55 paragraph 2 of the Income Tax Implementation Regulation (EStDV).
