Basic ability insurance tax declaration: Make optimal use of contributions and save taxes
10 May 2025
8
Minutes
Katrin Straub
CEO at nextsure
Can you deduct contributions to basic ability insurance from tax? Yes, it is possible, but there are important details to consider. This article shows you how to declare your basic ability insurance on your tax return and what you need to take into account.
The topic in brief and concise terms
Contributions to the core ability insurance are tax-deductible as other precautionary expenses, but they are often limited by maximum amounts that are already reached through health and care insurance contributions.
The entry is made in the Pension Expenses section of your tax return.
Pension benefits from basic disability insurance are generally subject to taxation on the earnings portion. [§22]
Basic ability insurance in the tax return: The essentials at a glance
Contributions to the basic ability insurance are counted as other pension expenses. You can enter these in the 'Vorsorgeaufwand' section of your tax return. For employees, there is often a maximum amount of 1,900 euros annually. Self-employed individuals can claim up to 2,800 euros. However, these amounts are often already reached through contributions to health and nursing care insurance. Therefore, additional tax savings through basic ability insurance is not always possible. Nevertheless, providing the correct information is important for a complete tax return.
Claiming contributions for basic ability insurance for tax purposes: Here's how it works
The contributions to the basic capability insurance are treated as special expenses in the tax return. Specifically, they fall under "other precautionary expenses" according to Paragraph 10 of the Income Tax Act. You enter the paid contributions in the annexe for precautionary expenses, usually in the lines for other precautionary expenses. Many insurers separately list the deductible contributions, which makes entry easier. It is advisable to use the annual contribution certificate from your insurance for the exact figures. An overview of deductible insurances can be helpful. The tax impact depends on whether your personal maximum amount for precautionary expenses has already been exhausted.
Maximum amounts for precautionary expenses: A decisive factor
The tax deductibility of personal contributions is limited. For employees, civil servants, and pensioners, the maximum amount for additional personal contributions is 1,900 euros per year. Self-employed individuals and freelancers can claim up to 2,800 euros annually. However, this allowance is primarily filled by contributions to basic health insurance and statutory nursing care insurance. As these mandatory contributions often already utilize the entire maximum amount, there is often no room left for further insurance such as disability insurance for additional tax savings. Therefore, a thorough examination of your individual situation is essential. Information about where to enter insurances can be helpful here.
Here is an example list of insurances that can fall under the maximum amount:
Private Liability Insurance
Car Liability Insurance
Accident Insurance
Term Life Insurance (under certain conditions)
Disability Insurance
Basic Capability Insurance
Having precise knowledge of these regulations is important for your financial planning.
Practical example: When is it worth specifying the basic capability insurance?
Let’s assume an employee pays 2,000 Euro annually for their health and nursing care insurance. This means the maximum amount of 1,900 Euro is already exceeded. Additional contributions for a basic capability insurance, for example 500 Euro annually, would not lead to further tax savings in this case. It’s different if the contributions to health and nursing care insurance are lower, for example only 1,500 Euro. Then, an additional 400 Euro for other preventive expenses, such as contributions to basic capability insurance, could be claimed for tax reduction. Therefore, an individual assessment is always necessary. A look at the general tax rules for insurance can provide clarity. Correct reporting is still important for a complete tax return, even if it does not result in direct savings.
Expert depth: Current rulings and legal assessment
A judgment by the Federal Court of Justice (BGH) on 11th December 2024 (Ref. IV ZR 498/21) has caused a stir. According to this, the basic ability insurance (GFV) does not constitute traditional income protection insurance in the strictest sense. This is because it insures specific abilities rather than general earning capacity. This legal classification may affect whether insurers categorise the GFV as life or property insurance. However, for tax deductibility as precautionary expenses under paragraph ten of the Income Tax Act (EStG), this currently has mostly no direct consequences, as it is still treated as other precautionary expenses. Our expert tip: Keep all premium proof carefully and review your situation annually. The definition of basic ability insurance is fundamental in this context. It remains to be seen whether such judgments will lead to changes in tax treatment in the long term.
Base ability insurance versus occupational disability insurance in the tax system
Both the basic ability insurance and the occupational disability insurance (BU) can be declared as other precautionary expenses in the tax return. The same maximum amount of €1,900 (employees) or €2,800 (self-employed) applies to both for other precautionary expenses. In practice, this amount is often already exhausted by health and nursing care insurance contributions. The tax advantage is therefore similarly limited for both types of insurance if the maximum amounts are already reached. The decision between basic ability insurance or BU should therefore primarily be based on individual protection needs and the respective triggers, not solely on tax aspects. For self-employed individuals, basic ability insurance can be an important safeguard. The question of whether BU or basic ability insurance is more suitable needs to be clarified individually.
Special case: Payment of the pension from the basic ability insurance
If the insurance event occurs and you receive a pension from your occupational disability insurance, the question of its taxation arises. Generally, pensions from private personal insurances that were taken out with ongoing contributions are taxable according to the yield portion. The amount of the yield portion depends on the age at the start of the pension and is regulated in Paragraph 22 Number 1 Sentence 3 Letter a Double Letter bb EStG. For example, if the pension begins at the age of 50, the yield portion is 30 percent of the pension. Only this portion is subject to income tax. If the taxable portion is below the basic allowance, no taxes are due. It is advisable to seek tax advice on this matter at an early stage. The benefits of our occupational disability insurance are also designed to be transparent.
Design tips and recommendations for your tax return
More useful links
Wikipedia offers a comprehensive overview of disability insurance.
The Federal Ministry of Justice provides the full text of paragraph ten of the Income Tax Act (EStG) concerning special expenses.
The German Pension Insurance provides detailed information on the taxation of pensions and other tax aspects of retirement planning.
FAQ
Can I always deduct the basic ability insurance from my taxes?
Yes, you can claim the contributions as tax-deductible expenses. However, actual tax savings depend on whether the maximum amounts (€1,900 for employees, €2,800 for self-employed individuals) have already been exhausted by other insurances, particularly health and long-term care insurance.
Which annex do I need for the basic capability insurance in the tax return?
You need the supplementary provision form to claim your contributions to the basic ability insurance.
What happens for tax purposes if I receive a benefit from the basic ability insurance?
If you receive a pension from basic ability insurance, it generally needs to be taxed with the so-called earnings component. The amount of this component depends on your age at the start of the pension. [§22]
Is a basic abilities insurance policy worthwhile only for tax reasons?
No, taking out a basic capabilities insurance should primarily be based on your individual coverage needs. Tax benefits are often limited, as the maximum amounts for precautionary expenses are usually already covered by health and nursing insurance contributions.
Is there a difference in the tax treatment of occupational disability insurance?
There is no significant difference regarding the deductibility of contributions as other precautionary expenses and the applicable maximum amounts compared to occupational disability insurance.
Where can I find the exact amounts for my tax return?
The exact amounts of your basic disability insurance contributions paid are usually found in the annual certificate from your insurance provider.
