Energy Price Allowance – Double Taxation for Retirees?
At a time when energy prices are skyrocketing, the payment of an energy price allowance (EPP) offers some relief. It is intended to make life easier for those segments of the population who typically incur travel expenses in connection with their work and who are facing a heavy burden due to current energy price trends. In September 2022, income-tax-paying employees and those in mini-jobs were able to look forward to receiving the energy price allowance in the amount of €300.
Minijobbers: Gross relief = Net relief
However, with a few exceptions, the allowance is taxable. One exception is mini-jobbers who have no income other than their marginal employment. The FAQs on the energy price allowance from the Federal Ministry of Finance explicitly state: “For employees who earn only flat-rate taxed wages from short-term or marginal employment or temporary work in agricultureand forestry and have no other qualifying income for the entire year 2022, the EPP is not considered taxable income.” So far, so good.
Special Case: Retirees
The fact is that retirees receive a monthly income through their pension payments. Like regular employees, they are expected to pay taxes on the energy price allowance paid to them and are thus subject to income tax upon receipt of the energy price allowance. In conclusion, this leads to the classification of pension income as “qualifying income” within the meaning of the Ministry of Finance’s FAQs.
For those retirees who have non-taxable side income, such as from a mini-job, this means that the energy price allowance paid for the mini-job also becomes taxable. This affects approximately two million pensioners in Germany who are entitled to the allowance both as pensioners and as employed individuals.
The two payments of €300 that they likely looked forward to could thus, for example, amount to €600 minus the applicable income tax rate. It remains to be seen what the final version of the new Income Tax Act will look like, in which the federal government intends to take into account the increased cost of living in Germany.
