Pensioner tax credit and disability allowance in 2025: what are you entitled to?

In practice, it looks simple, but it’s not: pensions below the statutory limit are not taxed, and tax is deducted from earnings, which can be offset by the right allowances. For people with a disability, the degree awarded plays a role, for PWD/P holders a separate allowance, and both can be added together. Changes during the year are also common, and with them the pro-rata application of discounts. In this article, we’ll look at what disabled and retired people are entitled to, how discounts work in employment and business, and how to document them correctly.

Pensions and tax: when does a retirement pension get taxed?

A regular pension is tax-free up to 36 times the minimum wage in force on 1 January of that year. In 2025, the minimum wage is CZK 20,800, so the pension is exempt up to CZK 748,800 per year (i.e. CZK 62,400 per month). Only when this threshold is exceeded is part of the pension taxed. In practice, only a small proportion of pensions reach this threshold.

What does this mean for you? Non-working pensioners with a pension below the limit do not file a tax return and do not pay tax on their pension. However, if you earn extra money on top of your pension (employment, business), tax is normally paid on this income and you can claim allowances and deductions just like anyone else.

There is no tax rebate for pensioners. So what can you claim if you are working?

There is no specific tax relief for pensioners in the law. However, if you work or run a business in retirement, you may be entitled to:

• basic ratepayer relief – CZK 30,840 per year (CZK 2,570 per month), always in full for the year, even if you only had taxable income for part of the year;
• a disability allowance if you qualify;
• a discount for disabled person’s card holder, which can be combined with the disability discount.

Other common deductions/deductions you may qualify for include, for example, deductions for gifts, interest on home loans, pension and life insurance, etc.

A practical non-tax but budget-relevant point: from January 2025, working pensioners are also entitled to a 6.5% discount on insurance premiums(social security) – this does not reduce tax, but it does reduce contributions and increases net pay. It is applied through the employer or by the self-employed as part of the advance payments.

Disability discount

Anyone who has been awarded adisability pension is entitled to a disability allowance. This is not a pension credit, but a personal credit that reduces your calculated tax on income from employment or business. The amount depends on the degree of disability:

Grade I and II disability → basic allowance of CZK 2,520/year (CZK 210/month).

Grade III disability → extended discount 5 040 CZK/year (420 CZK/month).

The discount for disability can be combined with the discount for the holder of a ZTP/P card. The ZTP/P holder is entitled to an additional separate discount of CZK 16,140 per year and the two discounts are added together. So if you work and meet both the disability and ZTP/P conditions, both amounts will be reflected in the resulting tax.

The law also takes into account the situation where you have received an invalidity pension in the past and later started receiving an old-age pension. If your entitlement to an invalidity pension ceases because of the concurrence of an old-age pension, you will still be entitled to the relevant invalidity allowance – if you can prove this with the documents provided (see below).

What exactly is an invalidity pension and a disabled person’s PIC/P card

An invalidity pension is a pension benefit paid to people whose ability to work has been significantly and long-term reduced as a result of a medical condition. It is not just an illness or difficulty, but a long-term adverse health condition that has a measurable impact on the ability to work. This is assessed by a social security assessor and the outcome is divided into three grades according to the percentage decline in work ability:

• Grade I (approximately 35-49%),
• Grade II (50-69%) and
• Grade III (70% or more).

On the basis of the assessment, the Czech Social Security Administration(CSSA) issues a decision on the award of a disability pension of the given level.

In addition to the state of health, the required period of pension insurance is always examined for an invalidity pension. Its length depends on the age at the time of disability (e.g. over 28 years of age, at least 5 years in the last 10 years; for persons over 38 years of age, the possibility of proving 10 years in the last 20 years is also assessed).

The disability card is then a social tool that does not assess work-related disability, but rather limitations in mobility or orientation in everyday life. It is issued by the Labour Office after an assessment of the health condition by the assessment service of the Ministry of Labour and Social Affairs.

There are three designations:

1. TP (severe disability)
2. ZTP (particularly severe disability)
3. ZTP/P (particularly severe disability with the need for a guide).

A person whose long-term health condition substantially limits movement or orientation is eligible. In the case of PWD, this is typically a severe mobility or orientation impairment, and in the case of PWD/P, a particularly severe or total disability with the need for a guide.

The PWD card has various special benefits (transport, social, etc.). For tax purposes, it is important that the holder of a PWD/P card can claim a separate tax credit, which is added to the disability credit if you are also entitled to it. The fact that the card is dealt with by the Labour Office and disability is assessed by the CSSA is by design: they are two different systems – one looking at the impact on everyday life (PWD), the other at the impact on ability to work (disability).

How to claim disability benefits as an employee

If you’re an employee, you claim the discount monthly from your employer using the Taxpayer Declaration Form (pink declaration). You fill it out when you start, or at any time during the year when you become newly eligible for the discount.

The payroll office usually makes theannual settlement in February (supporting documents must be received by mid-February – the specific date is announced by the Inland Revenue, for the 2024 settlement by 17 February 2025).

What you need to submit to your employer:

• Decision on the award of disability pension (1st/IIth or 3rd level) and proof of pension payment (e.g. certificate from ČSSZ) annually.
• In cases where the invalidity pension has ceased due to concurrence with the old-age pension, or is refused for reasons other than health, a certificate from the tax administrator proving that the conditions have been fulfilled shall be submitted.
• For a discount for a disabled person with a disabled person’s card, submit the disabled person’s card or the decision granting it.

For personal allowances (disability, PWD/P), a pro rata monthly application applies – one-twelfth of the allowance for each month at the beginning of which the conditions were met. This is particularly practical when the degree of disability changes during the year.

How to claim disability benefits as a self-employed person

If you are self-employed, or an employee who has not applied for an annual settlement, you can claim the discount on your tax return for the previous year – electronically via the My Tax Portal. Attach the documents (the decision on the award of the disability pension, the annual pension payment certificate, or the tax administrator’s certificate or proof of disability pension) to the return or keep them ready for the tax administrator’s call.

Examples from practice: how discounts affect tax

Example 1: Working pensioner without disability

Mr Jaroslav is a retired pensioner (pension CZK 25,000/month → CZK 300,000 per year, exempt) and earns CZK 20,000 gross per month part-time. His employer applies a basic tax deduction of CZK 30 840. As a result, his annual tax is significantly lower (the discount is deducted directly from the calculated tax). At the same time, he can take advantage of a 6.5% discount on his insurance premiums, which will increase his net pay.

Example 2: Employee with a Grade II disability and a ZTP/P card

Ms Alena works three days a week, has a Grade II disability pension and is a PTP/P holder. She applies:

• basic ratepayer discount of CZK 30 840,
• the disability discount of CZK 2 520,
• the disability allowance of CZK 16 140.

In total, she will reduce her tax by CZK 49 500. The application is confirmed by the decision on disability + annual salary certificate and ZTP/P card.

Example 3: Moving from disability level II to level III

Mr Karl’s disability level was increased from II to III as of 1 July. He will claim 6 × (2 520/12) for January-June and 6 × (5 040/12) for July-December. The status on the first day of the month is decisive. The change shall be documented by a new decision.

Summary

There is no pensioners’ discount as such, but working seniors can reduce their tax significantly by ordinary personal allowances. The old-age pension is not taxed up to 36 times the minimum wage – for 2025, up to CZK 748,800 per year (CZK 62,400 per month); however, tax is deducted on earnings outside the pension. In particular, the basic taxpayer’s discount of CZK 30,840 per year, the disability discount (CZK 2,520 for stage I/II, CZK 5,040 for stage III) and a separate discount for PWD/P holders of CZK 16,140 can be applied – these discounts are cumulative. In addition, from 2025 onwards, a 6.5% discount on insurance premiums helps working pensioners, which reduces contributions and increases net pay.

Employees claim the discounts from their employer via a pink declaration, providing proof of a disability decision and an annual pension payment certificate (or decision in the case of PWD/P). The discounts are calculated pro rata by month according to the status on the 1st of the month; if the degree of disability changes in the year, the amounts are divided. Self-employed people (and those who do not apply for an annual settlement) apply the discounts on their tax return via the My Tax Portal. If a disability pension has lapsed only because of concurrence with an old-age pension, the disability allowance continues to apply.