Orphan’s Pension in Your German Tax Return

After the death of a parent or parents, a child in Germany is entitled to a so-called orphan’s pension. Like the widow’s or parenting allowance, it is one of the survivor’s pensions and is calculated based on the deceased’s pension entitlements. How much is the orphan’s pension, when is it paid, and is it tax-deductible? You will find out all this in the following article.

Tax refund for orphans – who is affected?

Entitled to an orphan’s pension are biological children, adopted and foster children, stepchildren, grandchildren, and siblings who lived in the household of the deceased and were largely entitled to maintenance. If a child loses one parent, they receive a so-called half-orphan’s pension. In the loss of both father and mother, the child is entitled to a full orphan’s pension, but only if the deceased parent either paid contributions to the statutory pension insurance for at least five years or was receiving a pension until the time of death. This condition does not apply if the parent died as a result of a work-related accident.

Taxable orphan’s pension – how much is it?

The amount of the orphan’s pension amounts to:

• in the case of a half-orphan’s pension, 10% of the insured person’s pension that the deceased would have been entitled to or was already receiving,
• in the case of an orphan’s pension, 20% of the insured person’s pension that the deceased would have been entitled to or was already receiving.

There is also the possibility of receiving an additional supplement to the orphan’s pension, the amount of which depends on the pension periods completed by the deceased parent(s). If a parent dies before reaching the age of sixty-five, the orphan’s pension is reduced by a deduction. From July 1, 2015, income is no longer considered in the calculation of the orphan’s pension.

Tax on a half-orphan’s pension – start of payment

For the start of payment of an orphan’s pension, it is crucial whether the deceased parent received their own pension or not. If they were already a pensioner, the child receives the orphan’s pension at the earliest from the month following the parent’s month of death. If the deceased was still employed, the orphan receives the pension from the parent’s date of death.

Tax refund of the orphan’s pension and age of the child

According to the law, an orphan can receive an orphan’s pension until the age of eighteen. However, this period can be extended until the age of twenty-seven if the child:

• is still in school,
• participates in a school or vocational education,
• completes a voluntary social or ecological year,
• is unable to support themselves due to a disability.

The orphan’s pension continues to be paid if there are no more than four months between the next educational phase and the minimum voluntary service.

Income tax on orphan’s pensions

Since 2005, family pensions in Germany – and thus also orphan’s pensions – are taxed at a fixed rate. An orphan’s pension is attributed to the child for tax purposes. It does not increase the income of the widow/widower. Theoretically, this also means that the child is obliged to submit a tax return with Appendix R and declare the orphan’s pension for tax purposes. In practice, however, this rarely happens. This is because the children do not have other income and the orphan’s pension itself is not very high. If a child receives an orphan’s pension from the deceased parent’s employer, the payment is not treated as a survivor’s pension and must be taxed as wages.

Orphan tax in Germany – summary

The German state financially supports children who have lost one or both parents by paying them an orphan’s or half-orphan’s pension. These benefits are taxed like a pension. Since the calculation of the tax refund for orphans often seems complicated, it is advisable to use a pre-prepared tax program for Germany. If you choose the PREMIUM package from Taxando, you have the option to settle your orphan tax in Germany.