Budget 2026: With the new tax reduction for retirees, who are the winners and losers? We explain

The government proposed on Tuesday to replace the current 10% tax deduction on pensions with a flat rate of 2,000 euros , which should have little impact on retired couples, but risks increasing taxes for pensioners living alone.

Very few winners

"For all retirees at the bottom of the tax scale (...), their tax burden will decrease ," said Economy Minister Eric Lombard on Tuesday.

But these tax reduction opportunities will focus on young retirees (under 65) whose pensions before deductions are between approximately 18,970 euros and 20,000 euros.

In fact, below approximately 18,970 euros of declared income, before deductions and reductions, single retirees are already not subject to income tax.

Above €20,000, the current 10% tax reduction on declared income mathematically represents a greater potential tax reduction than the €2,000 flat rate proposed by the government. Pension taxes for retirees in this case will therefore increase.

As for retirees over 65, there will be no winners . They can in fact benefit from another special allowance, generally 1,398 euros for retirees close to the tax threshold (with net income below 28,170 euros, according to the ceiling applicable this year).

Taxable persons over 65 therefore already exceed the threshold of 20,000 euros declared annually, from which the new proposed reduction of 2,000 euros is less attractive.

Finally, for those who benefit from the measure, the savings would be minimal, 4 euros per year for example for a single pensioner under 65 with an annual income of 19,920 euros.

Probably new taxable retirees

The government intends to renew this year's income tax scales identically next year.

The proposed new allowance would, however, slightly increase (+0.5%) the threshold at which retirees would become liable to tax: currently, it takes approximately 17,070 euros after the allowance to be taxable (18,970 euros before the 10% allowance), a threshold which would rise to 19,070 euros with the 2,000 euro allowance.

But the 2026 taxes will be calculated on the income of 2025 , the year in which basic pensions will be revalued by 2.2%, which should automatically make retirees liable to tax who were not previously liable.

For retirees over 65, the tax threshold would even be reduced, from around 20,510 euros declared for a single retiree to 20,460 euros, which should also increase the number of retirees liable to tax.

Single retirees will have to pay more

From 20,000 euros declared, the tax increase would be more or less marked depending on the composition of the tax household.

Where the current 10% reduction applied to the tax household, the reduction of 2,000 euros would apply to each member.

The maximum amount of tax relief that retirees can benefit from, currently set at around 4,400 euros per tax household, would therefore vary from 2,000 euros for a single retiree to 4,000 euros for a couple.

For example, a widowed pensioner with an annual income of 30,000 euros would benefit from a tax reduction of 3,000 euros and would pay around 1,365 euros in taxes per year.

With only 2,000 euros of tax relief, he should pay around 1,525 euros in taxes per year .

At most, the taxable income of a single pensioner can increase by 2,400 euros with the new tax reduction ceiling.

This represents a tax surcharge that varies depending on income level, as the rates are progressive. This amount can reach just over €1,080 per year for the wealthiest retirees.

Since 2014, widowed retirees no longer benefit from the "half-tax share" which allowed them to further reduce their taxable income.

Retired couples spared

The new method of calculating the ceiling should relatively spare retired couples, even the most well-off.

The maximum allowance would increase from 4,400 euros to 4,000 euros, so the increase in income taken into account in the calculation of taxes would be limited to 400 euros.

This amount corresponds to a maximum tax surcharge of 180 euros per year, an amount which would only be reached by very wealthy retirees, whose income would largely exceed the last income bracket of the scale (around 180,300 euros per year).