Disability insurance tax-deductible: Secure maximum benefits
09.06.25
4
Minutes
Katrin Straub
Managing Director at nextsure
The contributions to your occupational disability insurance can reduce your tax burden. But how exactly is a BU policy tax-deductible, and what applies to the pension? Understand the rules and optimise your tax return.
The topic in brief and concise terms
Contributions to disability insurance can be deducted as other precautionary expenses up to EUR 1,900 (employees) or EUR 2,800 (self-employed), but these allowances are often used up by health and long-term care contributions.
The private disability pension is taxed only on the small deemed return portion, whereas disability pensions from occupational pension schemes or Rürup are fully taxable.
A supplementary occupational disability insurance policy attached to a Rürup pension enables higher tax deductions for contributions (up to €27,566 in 2024). [4,1]
Tax deductibility of occupational disability insurance contributions: understanding the basics
Contributions to a standalone occupational disability insurance policy (SBU) are generally tax-deductible as other precautionary expenses. This applies to both employees and self-employed individuals. However, deductibility is limited by annual maximum amounts. For employees and civil servants, this is 1,900 euros, and for self-employed individuals 2,800 euros per year. These maximum amounts are often already reached through contributions to basic health and long-term care insurance. In such cases, BU contributions no longer reduce tax liability. Contributions to BU insurance as supplementary insurance (BUZ), for example to term life insurance, can also be claimed as other precautionary expenses, with the same maximum amounts applying. A careful review of your individual situation is therefore crucial in order to make full use of the tax-deductibility potential of your BU insurance. Find out more about how you can claim tax relief on your occupational disability insurance. The next section explains exactly where you should enter these expenses in your tax return.
How to correctly declare BU premiums in your tax return: here's how
To claim your contributions to occupational disability insurance for tax purposes, these must be entered in the Vorsorgeaufwand section of your income tax return. For a stand-alone occupational disability insurance policy (SBU), this is generally the case under “other miscellaneous retirement provision expenses”. Some sources cite line 45 here (as of the 2023 tax return), while others cite line 49. [3,2Ü,4] You should therefore always check the current form or consult a tax adviser. Contributions to a supplementary occupational disability insurance policy (BUZ) linked to a Rürup pension, by contrast, are recorded together with the Rürup contributions under “contributions to retirement provision”. [6,4] It is important to know that, even with a gross income of around EUR 2,000 per month, contributions to health and long-term care insurance can exceed the deductible maximum amount of EUR 1,900 for employees. A calculation using a BU insurance calculator can provide an initial indication of contributions. The tax treatment of the BU pension paid out is another important aspect, which we will now consider.
Taxation of disability insurance benefits: What to expect in the event of a claim
If you receive benefits from your occupational disability insurance, this disability pension must be taxed. In the case of a private occupational disability insurance policy (third pillar of the three-pillar model), taxation applies only to the so-called earnings component. The amount of the earnings component depends on the expected term of the pension: the shorter the remaining pension period until the contractually agreed retirement age, the lower the taxable share. If, for example, the pension term is still fifteen years, only sixteen per cent of your disability pension has to be taxed. If the taxable part of your pension is below the annual basic tax allowance (11,604 euros for 2024, 12,084 euros for 2025), no tax is due. [2,2Ü] By contrast, a disability pension from occupational pension provision (second pillar) is taxed in full at your personal tax rate. The same applies to disability pensions from Rürup contracts (first pillar), which are taxed on a deferred basis. You can also find out how a private disability pension tax calculator works. Further details must be observed for special arrangements.
Expert knowledge: the three-layer model, Rürup combination and recent rulings
The German retirement provision system is divided into three layers, which has a significant impact on the tax treatment of your occupational disability insurance. Most private BU contracts fall into the third layer (private provision). Here, contributions are only deductible to a limited extent, but the pension is taxable only on the small earnings portion. An occupational disability rider (BUZ) attached to a Rürup pension (basic pension, first layer) offers particular advantages: since 2023, the contributions can be deducted in full as retirement provision expenses, up to the annual maximum of EUR 27,566 for single persons in 2024. [4,1,5] A common requirement is that the BUZ share does not exceed forty-nine percent of the total contribution. In the event of a claim, however, the pension from such a Rürup-BUZ is then taxed (almost) in full. Our expert tip: make sure you correctly declare your retirement provision in your tax return.
The following points are relevant for experts:
Litigation costs: Costs incurred in legal proceedings over the BU pension may, under certain circumstances, be deductible as employment expenses if they are existentially necessary (in accordance with Section 33 of the Income Tax Act). [3-]
Reimbursed taxes: If an insured person also receives reimbursement for taxes attributable to lost earnings as part of a loss of earnings claim, that reimbursement is also subject to income tax, as confirmed by a BFH ruling (IX R 5/23). [2-]
Contribution amount: Contributions to statutory pension insurance and professional pension schemes also count as deductible retirement provision expenses and reduce the scope for Rürup contributions.
Appendix for retirement provision expenses: The exact line numbers may change each year; for 2023, line 45 or 49 was often given for SBU. [3,2Ü]
The choice of the right layer and contract structure has a significant impact on the tax treatment of your BU insurance. Careful planning is therefore essential. We will be happy to help you find the optimal solution for your situation.
Optimise your tax liability with occupational disability insurance
The tax deductibility of occupational disability insurance is a complex topic with many facets. While contributions are generally deductible, maximum amounts of €1,900 or €2,800 for other retirement provision expenses often limit the actual tax savings. One exception is the combination with a Rürup pension, where contributions of up to €27,566 (2024) can be claimed as retirement provision expenses. [4,1] In the event of a claim, the private BU pension is taxed only at the favourable earnings portion, whereas pensions from occupational pension schemes or Rürup contracts are fully taxable. It is important to understand the relationships between insurance and taxes in detail. Individual advice helps you develop the strategy that is right for you and make the most of all tax advantages. Knowing which insurance policies are deductible is an important first step. At nextsure, we offer you a comprehensive analysis of your situation. Request your personalised risk analysis now.
More useful links
The Federal Ministry of Finance provides documents on income tax regulations.
The Federal Ministry of Finance offers insights into current income tax regulations.
The German Pension Insurance provides statistics and reports on reduced earning capacity pensions.
The Consumer Advice Centre provides a PDF document with valuable consumer information.
Destatis, the Federal Statistical Office, publishes press releases and data.
The Federal Agency for Civic Education (bpb) offers comprehensive information on social insurance.
FAQ
Are contributions to occupational disability insurance tax-deductible?
Yes, contributions to occupational disability insurance can be claimed as other precautionary expenses in the tax return. For employees and civil servants, the maximum amount is EUR 1,900; for self-employed people, EUR 2,800. However, this amount is often already used up by contributions to health and long-term care insurance.
How is the disability pension from an occupational disability insurance policy taxed?
A pension from a private disability insurance policy (3rd pillar) is taxed only on the so-called income portion. This depends on the remaining term of the pension. Pensions from an occupational pension scheme (2nd pillar) or a Rürup pension (1st pillar) are generally fully taxable.
Where do I enter my occupational disability insurance on my tax return?
The contributions are entered in the special expenses section for retirement provision. For a separate occupational disability insurance, this is under “other miscellaneous retirement provision expenses” (e.g. line 45 or 49, depending on the tax year). [3,2Ü] Contributions to a BUZ with a Rürup pension are recorded under retirement provision expenses.
What is the difference between SBU and BUZ for tax purposes?
Contributions to standalone occupational disability insurance (SBU) as well as to occupational disability supplementary insurance (BUZ) attached to a private risk or pension policy fall under other pension expenses, subject to the limited maximum amounts. A BUZ attached to a Rürup pension can allow higher deductions within retirement provision expenses.
Do BU contributions always reduce tax?
No, not always. Since the maximum amounts for other deductible expenses (EUR 1,900 / EUR 2,800) are often already reached or exceeded by contributions to statutory health and long-term care insurance, entering disability insurance contributions in many cases does not lead to any additional tax savings.
Is there a tax allowance for the occupational disability pension?
For the occupational disability pension itself, there is no specific allowance. However, only the taxable portion of the private occupational disability pension has to be taxed. If the total taxable income (including the taxable part of the occupational disability pension) is below the general basic allowance (e.g. EUR 11,604 for 2024), no income tax is payable. [2]
