Click to learn about Riester subsidies, tax benefits, and formulas
What is Wohn-Riester?
Wohn-Riester is a German state-subsidized retirement savings scheme that can be used for home purchase or debt repayment. It combines direct subsidies (Zulagen) with tax advantages (Sonderausgabenabzug) to help you build equity for your own home. The savings can be withdrawn tax-free for purchasing, building, or paying off a home loan.
Types of Benefits
Direct Subsidies (Zulagen)
The state pays €175 basic subsidy (Grundzulage) per person per year, plus €300 per child born after 2008 (€185 for older children). To receive full subsidies, you must contribute at least 4% of your previous year's gross income minus subsidies.
Tax Deduction (Sonderausgabenabzug)
Your Riester contributions (including subsidies) can be deducted from taxable income up to €2,100 per year. The tax office performs a 'Günstigerprüfung' (better-off check) and applies whichever benefit is higher: subsidies or tax savings.
Wohn-Riester Specifics
Unlike regular Riester, Wohn-Riester savings can be withdrawn during your working life to buy or build a home, or to repay a home loan. The withdrawn amount is recorded in a 'Wohnförderkonto' and taxed in retirement.
Key Formulas
Min. = 4% × Gross Income − Total SubsidiesGrundzulage = €175 per person per yearKinderzulage = €300/child (after 2008) or €185/child (before)Savings = Contribution × Marginal Tax RateBenefit = max(Subsidies, Tax Savings − Subsidies)Important Notes
- • Withdrawn amounts are taxed in retirement (nachgelagerte Besteuerung)
- • Breaking the contract early results in repayment of subsidies and tax benefits
- • The Wohnförderkonto balance must be settled by age 68 (lump sum or annual payments)