The PKV Tax Strategy — Prepaying Health Insurance Contributions

A little-known tax rule

Under German tax law (§10 Abs.1 Nr.3 Satz 4 EStG), privately insured individuals can prepay health insurance contributions for up to three years.

These payments are fully deductible as special expenses in the year they are paid.

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How the strategy works

Policyholders can prepay:

• The current year
• Plus up to two additional years

The entire amount becomes tax deductible in the year of payment.

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Why this can create tax advantages

Health insurance contributions already consume most of the tax deduction limits for insurance expenses.

By prepaying several years:

• Future deduction limits become available
• Other insurance policies become deductible

Examples include:

• Liability insurance
• Occupational disability insurance

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When the strategy is particularly useful

The approach is often beneficial when:

• Receiving severance payments
• Expecting unusually high income in a given year
• Planning lower income in subsequent years

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Practical requirements

Several conditions must usually be met:

• Advance coordination with the insurer
• Payment before year-end (often mid-December deadlines)
• Confirmation of the exact payable amount

Some insurers additionally offer discounts for advance payments.