Overview

• The measure applies only after reaching the statutory retirement age and only to dependent, social‑insurance employment, with cabinet consideration expected in mid‑October for a 1 January 2026 start if approved.
• Self‑employed, freelancers and early retirees are excluded, and a Deutsche Rentenversicherung expert notes the tax break does not apply before the regular pension age even if someone already draws a reduced pension.
• Earnings up to €2,000 per month are income tax‑free but remain subject to health and long‑term care contributions, and employers must still pay certain pension contribution shares, reducing the net gain.
• The government draft projects about €890 million per year in lost tax revenue in the near term and builds in a two‑year review that could consider widening eligibility, for example to freelancers.
• Research institutes and labor scholars expect limited labor‑market effects, with a DIW estimate of roughly 230,000 beneficiaries and studies stressing that work conditions and flexibility drive later retirement decisions.