Investment & Wealth
Basic Ability Insurance
disability insurance tax declaration
Occupational Disability Insurance Tax Declaration: Make the Most of Contributions and Save Taxes
Can you deduct contributions to the basic disability insurance from your taxes? Yes, this is possible, but there are important details to consider. This article will show you how to declare your basic disability insurance in your tax return and what you need to take into account.
The topic in brief and concise terms
Contributions to basic ability insurance are tax-deductible as other precautionary expenses, but are often limited by maximum amounts that are already reached by health and long-term care insurance contributions.
The entry is made in the 'Vorsorgeaufwand' section of your tax return.
Pension benefits from the basic ability insurance are usually taxable with the portion of earnings. [§22]
Basic capability insurance in the tax return: Key points at a glance
Contributions to basic ability insurance are classified as other pension expenses. You can include these in the 'Vorsorgeaufwand' section of your tax return. For employees, there is often an annual maximum amount of 1,900 euros. Self-employed individuals can claim up to 2,800 euros. However, these amounts are frequently already reached through contributions to health and nursing care insurance. Therefore, an additional tax saving through basic ability insurance is not always possible. Nevertheless, providing the correct information is important for a complete tax return.
Claiming tax on contributions to basic skills insurance: This is how it works
The contributions to the basic ability insurance are treated as special expenses in the tax return. Specifically, they belong to the "other provisions for old age" according to Paragraph 10 of the Income Tax Act. You enter the paid contributions in the pension expenses annex, usually in the lines for other provisions. Many insurers list the deductible contributions separately, which makes the entry easier. It is advisable to use your insurer's annual contribution certificate for the exact figures. An overview of deductible insurances will assist you. The tax effect depends on whether your personal maximum allowance for pension expenses has already been exhausted.
Maximum amounts for pension expenses: A crucial factor
The tax deductibility of pension expenses is limited. For employees, civil servants, and retirees, the maximum amount for other pension expenses 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 and statutory long-term care insurance. Since these mandatory contributions often already exhaust the entire maximum amount, there is often no room for additional tax savings for other insurances such as basic capability insurance. Therefore, a precise examination of your individual situation is essential. Information on where to enter insurances is helpful here.
Here is an example list of which insurances may fall into the maximum amount:
Private liability insurance
Car liability insurance
Accident insurance
Term life insurance (under certain conditions)
Disability insurance
Basic capability insurance
An accurate understanding of these regulations is important for your financial planning.
Practical example: When is it worth indicating the occupational disability insurance?
Let's assume an employee pays 2,000 euros annually for their health and long-term care insurance. This already exceeds the maximum amount of 1,900 euros. Additional contributions for a basic disability insurance, such as 500 euros annually, would not result in further tax savings in this case. It's different if the contributions to the health and long-term care insurance are lower, for example, only 1,500 euros. Then an additional 400 euros for other pension expenses, such as contributions to basic disability insurance, could be claimed to reduce taxes. Therefore, an individual assessment is always necessary. A look at the general tax rules for insurances can provide clarity. Nevertheless, providing the correct information is important for a complete tax return, even if no direct savings result.
Basic disability insurance versus occupational disability insurance in tax
Both basic ability insurance and occupational disability insurance (BU) can be declared as other precautionary expenses in the tax return. For both, the same maximum amount of 1,900 Euros (employees) or 2,800 Euros (self-employed) applies for other precautionary expenses. In practice, this amount is often already exhausted by health and nursing insurance contributions. The tax benefit is therefore similarly limited for both types of insurance, if the maximum amounts have already been reached. The decision between basic ability insurance or BU should therefore primarily be based on individual protection needs and the respective benefit triggers, not solely on tax aspects. For self-employed individuals, basic ability insurance can be an important form of protection. The question of whether BU or basic ability insurance is more suitable, needs to be clarified individually.
Special Case: Payout of the Pension from the Basic Ability Insurance
If the insurance claim occurs and you receive a pension from your basic ability insurance, the question of its taxation arises. Generally, pensions from private personal insurance, which are concluded against ongoing contributions, must be taxed with the profit portion. The amount of the profit portion depends on the age at the start of the pension and is regulated in Paragraph 22 number one sentence three letter a double letter bb of the Income Tax Act. For example, the profit portion for a pension starting at the age of 50 is 30 percent of the pension. Only this portion is then subject to income tax. If the taxable portion is below the basic allowance, no taxes are incurred. It is advisable to seek tax advice on this at an early stage. The benefits of our basic ability insurance are also transparently designed.
Design tips and recommendations for your tax return
To make the most of your basic skills insurance tax return, consider the following points:
Carefully collect all of your insurance contribution certificates throughout the year.
Check whether your contributions to health and nursing care insurance already reach the maximum limit for special expenses. These are often over 1,500 euros.
Always enter the contributions to the basic skills insurance in Annex Vorsorgeaufwand, even if no direct tax savings are expected. It serves completeness.
Use tax software or consult a tax advisor to avoid errors. Many programs guide you through the relevant forms.
Stay informed about changes in tax law, as regulations for deductible expenses can change. Every year there are small adjustments.
Careful preparation of your basic skills insurance tax return can be worthwhile. Even though the private liability insurance is tax-deductible, similar maximum limit regulations apply.
We at nextsure are happy to support you with information about your insurance coverage. Although we cannot provide tax advice, we help you gather the necessary documents for the contracts concluded with us.
Request an individual risk analysis now: Have your insurance situation checked free of charge and receive specific optimization suggestions.
More useful links
Wikipedia provides a comprehensive overview of the basic skills insurance.
The Federal Ministry of Justice provides the full text of paragraph ten of the Income Tax Act (EStG) on 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 declare the contributions as pension expenses. However, an actual tax saving depends on whether the maximum amounts (1,900 euros for employees, 2,800 euros for the self-employed) have already been exhausted by other insurance, particularly health and nursing care insurance.
Which form do I need for the basic ability insurance in the tax return?
You need the pension expense form to claim your contributions to the basic ability insurance.
What are the tax implications if I receive a benefit from the basic ability insurance?
If you receive a pension from the basic ability insurance, it usually has to be taxed with the so-called return on investment portion. The amount of this portion depends on your age at the start of the pension. [§22]
Is it worthwhile to take out basic ability insurance just for tax reasons?
No, taking out basic ability insurance should primarily be based on your individual protection needs. Tax benefits are often limited, as the maximum amounts for pension expenses are usually already reached through health and nursing care insurance contributions.
Is there a difference in the tax treatment compared to occupational disability insurance?
Regarding the deductibility of contributions as other pension expenses and the applicable maximum amounts, there is no significant difference to occupational disability insurance.
Where can I find the exact amounts for my tax return?
You can usually find the exact amounts of your paid contributions to basic ability insurance in the annual certificate from your insurance provider.
