Now that we are nearing the end of the year, we may not be thinking about tax returnalthough it is important to start preparing it in advance or doing it, take into account whether we have to do it or not. In the case of retirees and taking into account that in some cases what is collected is a fairly small pension, many wonder whether or not they have to pay personal income tax, since this tax, which tax on annual income, can be an economic challenge for many. two. However, Not all retirees are obliged to pay personal income taxand there are specific regulations that allow certain groups to be exempt.
The Tax Agency and Social Security have a specific set of rules that determine who is required to pay tax. Income tax and who may be exempt from this tax. These regulations, intended to alleviate the tax burden on the most vulnerable groups, take into account key factors such as annual income, the sources of this income and the personal and family situation of the beneficiary. For many retirees, these types of exemptions represent an opportunity to enjoy greater financial peace of mind, especially where income is not high or pensions are the only means of support. From minimum pensions to cases of permanent disability, through special situations such as those derived from acts of terrorism or civil war, there is a wide list of groups that can benefit from these tax advantages. Below we detail in more detail the conditions you must meet to find out whether or not your pension has to pay personal income tax.
What is personal income tax and who is required to pay it?
He Personal Income Tax (IRPF) This is a state tax that taxes income earned. This includes salaries, pensions and other personal income. In the case of retirees, the pension is considered as income from work, which requires them to pay taxes in the same way as any active worker. There are, however, limitations and exceptions that may exempt many seniors from this payment.
In general terms, the Retirees who receive income of less than 22,000 euros per year from a single payer are not required to file an income tax return. This ceiling is reduced to 14,000 euros if you have additional income from other payers exceeding 1,500 euros per year. In other words, a large proportion of retirees with modest incomes will not have to worry about this tax.
Pensions exempt from personal income tax
From the indicated amount, there are a good number of taxable pensions, but there are also special cases in which the regulations exempt beneficiaries from personal income tax. Here are some of the pensions that benefit from this tax advantage:
- Absolute permanent disability or severe disability pensions: The exemption applies both to Social Security pensions and to those paid by other entities that replace this system. To benefit from it, the disability must make it impossible for the beneficiary to exercise any profession or trade.
- Public pensions for acts of terrorism: include pensions for widows, orphans and family members resulting from acts of terrorism. Benefits for decorations awarded for these acts are also exempt.
- Non-contributory pensions: Intended for those who have not contributed sufficiently during their working life, these pensions are also not subject to payment of personal income tax. They include financial assistance for people with limited resources, such as disability or non-contributory pension.
- Civil War Injury Pensions: those who suffered mutilations or injuries as a result of the Spanish Civil War, either through the State’s Passive Class Regime or through specific legislation, are exempt.
- Pensions for orphans or grandchildren and brothers and sisters under 22: These benefits, provided they come from public plans, are also not taxed if the beneficiaries are minors or incapable of working.
What is happening with minimum pensions?
The Treasury has confirmed that the Pensions which do not exceed the Interprofessional Minimum Salary (SMI) will also be exempt from tax. This means that retirees whose income does not reach 15,876 euros per year (1,134 euros per month in 14 payments) will not have to pay personal income tax. This tax relief applies to both contributory and non-contributory pensions within this limit.
This regulatory framework is particularly relevant for those who rely exclusively on their pension to cover their basic expenses. This measure aims to ensure that those on low incomes can take full advantage of their benefits.
Personal income tax deductions for retirees in 2024
Even though many pensions are exempt, Others must make deductions based on the amount received.
- Pensions up to 12,000 euros per year: 1% withholding tax.
- Pensions between 12,001 and 18,000 euros: deduction of 2.61%.
- Pensions between 18,001 and 24,000 euros: withholding tax of 8.69%.
- Pensions between 24,001 and 30,000 euros: withheld at 11.83%.
- Pensions above 30,001 euros: deduction of 15.59%.
This shows that the tax system strives to be progressive.or by applying higher deductions to those who receive higher incomes.
In short, exemption from personal income tax does not only depend on the amount of the pension, but also personal and family circumstances. People with low incomes, recipients of permanent disability pensions or those receiving non-contributory pensions are some of the groups who can say goodbye to this tax.
