Retirement tax in 2021: do pensioners pay income tax?

What tax benefits do pensioners have?

Pensioners are not automatically exempt from taxes, but all categories of citizens receiving a pension can count on tax benefits. These include:

• the right to exemption from property tax for one object;
• exemption from personal income tax (hereinafter referred to as personal income tax) on benefits;
• the right to receive a property tax deduction during the purchase of housing;
• benefits provided by regional and local authorities.

How much will the funds be deducted?

Pension tax in Russia 2021 is charged for card servicing and will be deducted in the amount of 750 rubles per year. Although at first glance this figure may seem large, only 62 rubles will be withdrawn every month. Although the state made such a decision and introduced a unified payment system, it takes care to index pensions. What it is? Indexation – increasing income. Recently, the Russian government has implemented such a pension increase by 5.4%. And this is not the limit, since in the near future the increase will occur by another 0.38%.

Who is entitled to tax benefits?

Vulnerable segments of the population may qualify for social protection from the state in the form of benefits. Persons receiving a pension are classified as beneficiaries. It includes:

• citizens who have retired due to old age;
• civil servants and citizens entitled to receive early retirement benefits;
• disabled people;
• citizens who have lost their breadwinner.

Legal regulation

The procedure for obtaining tax benefits is regulated by Federal laws, the Tax Code of the Russian Federation (hereinafter referred to as the Tax Code of the Russian Federation) and a number of Decrees of the Government of the Russian Federation. The regional administration also has the right to make its own adjustments, reduce the tax base, conduct explanatory work among the population and notify about responsibility if a debt has arisen.

According to Article 395 of the Tax Code of the Russian Federation, small indigenous residents of certain areas have the right not to pay land tax.

Article 407 of the Tax Code of the Russian Federation specifies the categories of pensioners applying for tax benefits on property:

• heroes of the USSR and the Russian Federation, persons awarded the Order of Glory of three degrees;
• participants in the Civil War, the Great Patriotic War and other military operations, who served in military headquarters, units, institutions, were part of the active army, former partisans, combat veterans;
• civilian mercenaries of the Soviet Army and Navy, internal affairs bodies, state security, who were on the staff of military units, institutions, headquarters;
• citizens who were involved in eliminating the consequences at the Chernobyl nuclear power plant and other man-made disasters; persons who took part in eliminating (or helping to eliminate the consequences of) accidents at nuclear installations;
• disabled people of groups 1 and 2, disabled since childhood;
• retired military personnel with more than 20 years of service;
• family members of military personnel who have lost their breadwinner; relatives of military personnel and civil servants who died in the line of duty;
• persons who became ill with radiation sickness or received disabled status during tests, exercises, and other work related to nuclear and space technology.

Conditions for providing tax benefits for pensioners

To apply for tax benefits for pensioners, you should contact the tax authority at your place of registration. The process of obtaining benefits is of an application nature, but you need to remember the following nuances:

• For working pensioners, the same tax benefits are provided as for non-working pensioners.
• Pensioners who own a private business or are individual entrepreneurs pay the same taxes as other citizens.

A table of tax privileges in accordance with the categories of pensioners who are entitled to them will help you understand the issue:

Property tax for individuals

Coordination of the cost of housing with the cadastre entailed an increase in tax fees.

The procedure for providing benefits has not changed - pensioners are exempt from paying property tax, but since 2015, if a person owns several properties of the same type, real estate to be excluded from the tax base will have to be selected.

The rule is addressed to scammers trying to re-register property by transferring ownership to an elderly person in order to avoid a fiscal fee.

Objects of preferential taxation:

Some types of real estate owned by pensioners are not subject to taxation. Benefits do not apply to luxury real estate worth over 300 million rubles.

Objects of preferential taxation include:

• apartment or individual residential building;
• room;
• residential country house building up to 50 sq. m;
• garage;
• rooms for creative activities.

Transport tax

This fee is classified as regional. The Tax Code of the Russian Federation does not contain specific rules regulating the exemption of pensioners from transport tax, but some features of the relief can be highlighted.

The following are not subject to transport tax:

• water transport equipped with a motor of no more than 5 liters. With.;
• agricultural machinery - combine or tractor;
• cars and motorcycles with an engine capacity of no more than 100 hp. With. and vehicles owned by persons with disabilities.

Transport taxation of pensioners has regional characteristics, for example:

• In the Novosibirsk region, pensioners pay a 20% tax rate on vehicles equipped with an engine of no more than 150 hp. With.;
• In the Samara region, the tax rate for persons receiving a pension is 50% of the total;
• In Moscow, all benefits for paying transport taxes have been abolished.

Land tax

Land tax is a local tax and is set by local authorities. However, at the federal level, starting from 2021, tax incentives for pensioners have been introduced in relation to land tax, providing for a reduction in the amount of tax by the cadastral value of 6 acres of land owned by them.

This means that for plots of 600 sq.m. and you won’t have to pay less land tax.

Other tax benefits (for example, complete exemption of pensioners from paying taxes on land of any size) may be established by regulatory legal acts of the relevant municipalities. All information about their presence or absence can be provided to the pensioner at the local administration or tax office. To take advantage of the benefits provided for by acts of local authorities, the pensioner must submit an application and documents confirming his preferential status.

According to Article 395 of the Tax Code of the Russian Federation, indigenous peoples of the North, Siberia, and the Far East of the Russian Federation and their communities are exempt from paying land taxes.

Property deduction

In relation to property acquired by a pensioner at his own expense, the right to a property deduction is granted. It can be completed once in a lifetime, if close relatives did not take part in the transaction. The amount to be refunded is 13% of the funds spent on the purchase of property. Its cost should not exceed two million rubles.

In the case of shared ownership, the fee is charged on the part of the property that is owned. Property tax deductions apply to purchase and sale transactions. To reduce income tax or completely exempt it from it, the following conditions must be met:

• reduction of the tax base due to tax deductions that reduce the amount of the fee payable;
• compliance with the minimum terms of ownership of property.

Personal income tax is the main source of income for regional and local budgets. The legislation of the Russian Federation does not provide any concessions for its payment for any categories of persons. State pension provision is not included in the tax base, therefore personal income tax is not assessed on:

• all types of pension benefits, fixed payments, social benefits;
• amounts in total not exceeding 4,000 rubles per year, with which the enterprise covers the payment for sanatorium vouchers, treatment, medical care, the purchase of medicines, the provision of financial assistance or gifts to former employees after retirement or in connection with dismissal due to disability.

For working pensioners

All Russian citizens are required to pay personal income tax. The Tax Code provides for a number of incomes that are not subject to taxation. These include pension payments to which working pensioners are entitled:

• social supplement;
• insurance and funded parts of the pension;
• fixed additional payment, pension supplements associated with indexation;
• financial assistance or gift given by a former employer;
• medical care, payment for treatment, sanatorium vouchers by the organization in which the pensioner left his position due to old age or disability;
• monetary compensation for expenses on medicines for former employees.

Tax deduction for the purchase and sale of real estate

Money spent on the acquisition or construction of real estate can be returned partially or completely. Tax deductions for the purchase of housing are available to both working and non-working pensioners.

However, the conditions for obtaining it will differ:

• For working pensioners, the right to receive a property tax deduction is valid directly from the year in which the property was registered as ownership. If the amount of the fiscal fee is less than the deduction amount, the unspent portion is carried over to subsequent years until it is fully used.
• For non-working pensioners, the remaining tax deductions are transferred to previous tax periods, taking into account the last three years before the acquisition and registration of real estate.

The amount of personal income tax payable on the sale of real estate is calculated at 13% of its value.

When calculating personal income tax, not only the period of ownership of the property is taken into account, but also the year of registration of ownership by the owner:

• Until 01/01/2016 – the fee is charged on the cost specified in the purchase and sale agreement.
• After 01/01/2016, recalculation is carried out based on the higher value: contractual or cadastral.
• If a tax deduction is not possible, the amount of profit from the sale of real estate can be reduced. If there are documents confirming the amount of expenses that the seller incurred during the purchase, the fee will be calculated on the difference between the purchase price and the sale price.
• If the seller has acquired other real estate to replace the sold property within 1 year, the income from the sale of housing will be reduced by the amount of expenses for the new purchase, but not more than 2 million rubles.

Pensioners can save when paying personal income tax on income received from the sale of housing if they implement the benefits provided by law:

• Use a tax deduction of 1 million rubles if the minimum period of ownership of the property is met. For taxpayers who acquired and registered ownership of property: before 01/01/2016 – the minimum period of ownership of the property is 3 years; after 01/01/2016 – 5 years.
• Once per tax period (calendar year), regardless of the number of property objects sold, the seller can receive 1 deduction.

You can register and apply for a benefit:

• through the tax office, by personally contacting a consultant or inspector;
• by sending the relevant documents and/or copies thereof and an application by Russian Post to the address of the territorial office of the Federal Tax Service by registered mail;
• through the Federal Tax Service website using the electronic registration form;
• through your employer.

Documents required to apply for property tax benefits:

• passport of a citizen of the Russian Federation;
• pensioner's ID;
• taxpayer identification number;
• certificate of ownership of the property to which the tax deduction is applied.

New additional benefits under the new pension law and who will receive them

On October 3, 2021, Russian President Vladimir Putin signed a law raising the retirement age. Prior to this, the State Duma and the Federation Council adopted the document taking into account the presidential amendments. The adopted laws provide not only for raising the retirement age, but also for additional benefits for those who have very little time left before receiving an old-age pension.

A new term appears - “persons of pre-retirement age”.

Starting next year, they will include all those who reach retirement age “in the old way” - i.e. 60 year old men and 55 year old women.

According to the new rules, they will not yet be granted an old-age pension, but they will nevertheless be provided with a number of benefits:

Right to exemption from real estate tax

Starting next year, tax benefits for current pensioners will also be extended to people of pre-retirement age. In other words, upon reaching the age of 60 years (for men) and 55 years (for women), property owners will be exempt from:

A) From property tax for individuals - for one apartment (or room), one house (or part of a house), one garage (or parking space), one outbuilding (up to 50 square meters in area).

B) From land tax - on a plot of up to 6 acres.

In the current conditions, when there is a transition to calculating taxes based on the cadastral value of real estate (which inevitably entails an increase), the value of tax benefits increases every year.

Who will pay this tax and when?

All employees of public sector activities, those who have social benefits from the state, accept government payments, and pensioners have been transferred to the new Russian payment system MIR since 2018. The joint stock company “National Payment Card System” officially appeared in July 2014. But development began back in 2011. Before the payment system appeared on the market, providing money transfer and storage services, it had fully established its operation, taking into account the latest technical developments. First of all, this system meets international quality standards for making secure payments. What are the features of a plastic card?

• The name and logo are the result of an all-Russian vote.
• A hologram is a special square sign that allows you to distinguish a fake from a real card.
• Hidden signs. For example, when scanning a card with ultraviolet light, a currency symbol appears: ruble.
• A distinctive sign of the WORLD card is the application of a pattern.

The pension tax in Russia in 2021 began its work from the beginning of the year. All state employees received new cards in the first half (before July 1), and new clients - from July 1. But after the decree is issued, all pensioners do not need to immediately run to the bank to change their card. Each of them has a certain validity period. As soon as it ends, the card holder needs to come to the branch of the servicing bank. There he will receive a new card from the MIR payment system.

Right to keep your job

Employers will be prohibited from dismissing workers or refusing to hire them on the grounds that they have reached retirement age - under pain of criminal liability.

Corresponding changes are being made to the Criminal Code: the perpetrator will face a fine of up to 200 thousand rubles or compulsory labor for up to 360 hours (the bill has already been adopted in the third reading by the State Duma).

In addition, the period for payment of unemployment benefits for persons of pre-retirement age is extended depending on the length of service:

• when working for 20 and 25 years (women and men, respectively), the benefit is paid for 12 months,
• and for each year of service beyond the established duration, the period for payment of benefits is extended by another 2 weeks (but not more than up to 24 months in a total of three years).

Procedure for applying the new tax deduction

If several land plots are registered in the name of a pensioner, you can take advantage of the new tax benefit only on one of them, at the payer’s choice. This is indicated by the new clause 6.1 of Art. 391 Tax Code of the Russian Federation.

The tax authorities must be notified of this choice of site. The deadline is set until November 1 of the year, which is the tax period. That is, from which the beneficiary wishes to apply the deduction for the relevant area. Moreover, this decision must be final: after November 1 of the year, it is impossible to replay it and submit an updated notification with a different site.

EXAMPLE

Pensioner Shirokova owns 2 land plots in 2021. At the end of October 2021, she notified the Federal Tax Service about the area for which she wants to receive a deduction for the period 2021.

Most likely, you will not have to submit any documents other than the notification. The tax office should already have the necessary information as part of interdepartmental exchange. As a last resort, you can indicate the cadastral number of the plot and the document justifying its ownership (purchase and sale agreement, etc.).

Please note: the notification form for the selected site and the procedure for filling it out are approved by the Federal Tax Service of Russia. Surely, an electronic format will also be developed so that it can be sent through an individual’s personal account on the website of the Federal Tax Service of Russia. And what is important, you can send this document to any inspection of your choice.

If for some reason the beneficiary did not have time to submit a notification or completely ignored this opportunity, he will not be left without a deduction. When calculating the tax, the inspectorate will apply it to the area for which the calculated tax will be the highest. Which is quite fair.

Right to receive alimony

Family law provides for the right of disabled parents to receive child support from their adult children. In this case, the parents’ inability to work is confirmed either by disability or by reaching retirement age.

In connection with the upcoming increase in the retirement age, it is planned to leave at the same level the age when a parent has the right to demand alimony for his maintenance from a child - 55 and 60 years old (for women and men, respectively).

A project to introduce such changes to the Family Code has already been submitted to the State Duma for consideration. If approved, persons of pre-retirement age will be able to receive alimony, even if they have not yet been assigned an old-age pension.

Is the pension subject to income tax?

At its core, a pension is a social benefit that citizens in need of special material support can count on. The circle of its recipients is quite wide and this is not only the elderly. The pension is paid:

• military personnel with a certain length of service;
• disabled people;
• minors due to the loss of a breadwinner.

These social payments are not subject to personal income tax.

However, the majority of pensioners are elderly people who have reached the appropriate age and have the necessary work experience. How is such a pension formed?

Every month the employer pays so-called insurance premiums for each employee. Their amount is a certain percentage of the employee’s salary. Part of these funds goes to the Social Insurance Fund, the Compulsory Medical Insurance Fund, and the Federal Compulsory Compulsory Medical Insurance Fund. These are social and health insurance. Most of the funds paid by the employer go to the Pension Fund for the formation of the employee’s future pension . It, in turn, consists of insurance and savings parts.

Reference! If contributions for employees are made by their employer, then persons engaged in entrepreneurial activities pay for themselves at fixed rates.

According to current legislation, a citizen can leave the funded part in the state pension fund, or can choose a non-state pension fund (NPF). NPFs offer higher interest on these savings , so it is expected that the amount of pension received through them in the future will be higher.

Having figured out what types of pensions there are and what they consist of, you can answer the question regarding the taxation of pension payments with income tax.

Personal income tax is not withheld from payments from the state fund. If the pension comes from a non-state source, then it is subject to income tax. However, there are exceptions here. Thus, personal income tax is not paid on pensions paid by non-state pension funds that have the appropriate license .

There are also common cases when large employers independently enter into agreements with non-state pension funds of their choice or have their own fund. Their employees also do not pay tax upon retirement. In other words, personal income tax is taken only from the funded part of the pension, paid by a non-state pension fund that does not have a state license, with which the employee entered into an agreement directly on his own behalf.

The legislative framework

The rule that state pension payments are not taxed is supported by clause 2 of Art. 217 of the Tax Code of the Russian Federation. However, the same norm establishes that income tax is taken from the voluntary insurance of the funded part of the pension.

The right to an obligatory share in the inheritance

Today, people of retirement age can receive an inheritance even if they were not named in the will - provided that they are close relatives of the testator or simply lived with him and were dependent on him.

A bill has now been submitted to parliament that allows citizens of pre-retirement age to receive a mandatory share in the inheritance - i.e. The age for mandatory heirs will not change, despite the increase in the retirement age.

Of course, the most valuable benefit in the light of pension reform would be the lifting of the moratorium on indexation of pensions for working pensioners. But, unfortunately, such a bill has not yet been submitted to the Duma.

What other income besides pension payments is not subject to taxation?

We have already mentioned in this article that personal income tax is not deducted from funds received by a pensioner. So, it turns out that this tax benefit for pensioners in 2021 is not the only one. Persons on well-deserved rest are exempt from this tax in the following cases:

• when the enterprise where the pensioner worked provided medical and sanatorium vouchers for the former employee’s health improvement in resort facilities located in the country;
• when an employer pays for medical care or treatment of its retired employee;
• when a retired person receives cash payments from an enterprise or third-party organizations, if their total annual amount does not exceed 4,000 rubles.