10 Ways To Pay less tax via tax exemption
To pay less tax, there are many means to implement, from the correctly completed tax return to tax exemption schemes. If you are taxable, this case will be of great interest to you.
We give you 10 tips to reduce, or even eliminate, the amount of your income tax. Some are risk-free, such as allowances, reductions and tax credits. Others are more risky, such as financial investments.
Follow the guide to save money…
1 – The declaration of professional expenses
For employees, the tax authorities apply a 10% allowance on your income before calculating the amount of your taxes. While this is beneficial for employees who work close to home or are telecommuting, it is not always suitable for other cases.
It is then possible to opt for the declaration of professional expenses, we are talking about the deduction of actual expenses, which will replace the 10% flat-rate allowance. The deduction is capped (12,627 euros in 2019) and allows you to declare mileage costs as well as meal costs.
Our advice: always calculate the actual costs to see if they are more advantageous, note that in a couple, everyone can choose the system that is most favorable to them.
2 – Childcare tax credit
Childcare costs for children under 6 years old on January 1 of the tax year give rise to the opening of a tax credit. To benefit from it, the child must be in a daycare, crèche or with an approved childminder.
The tax credit granted is equal to 50% of the expenses actually incurred for the care of one or more children. The cost of meals and family aid received for the payment of childcare are therefore deducted. Expenses are deductible up to 2,300 euros and the tax credit is therefore capped at 1,150 per child cared for.
Good to know: a tax credit reduces the amount of tax payable and is returned to the taxpayer if the amount exceeds the tax due.
3 – The tax credit for home services
Certain home services give rise to a tax credit for having hired an employee in your main or secondary residence, whether you are the owner or a tenant. The services concerned relate to family or household assistance (Article D 7231-1 of the Labor Code). This particularly concerns childcare, school support, household services, gardening and small DIY work, computer assistance, assistance to the elderly or disabled, walking pets for dependent people. , etc.
The tax credit granted is equal to 50% of the expenses actually incurred for eligible home services. Expenses are deductible up to 12,000 euros (plus 1,500 euros per dependent within the limit of 15,000 euros maximum) and the tax credit is therefore capped at 7,500 euros.
Please note: certain services must not exceed specific limits, in terms of amount and number of hours.
4 – The energy transition tax credit
Known by the acronym CITE, this tax credit makes it possible to deduct part of the expenses incurred in the renovation of the dwelling to improve its energy capacity. It will be permanently abolished from January 1, 2021 in favor of the “MaPrimeRenov” system for low-income households.
However, households not eligible for MaPrimeRenov can still benefit from a transitional CITE for the 2020 tax return. Taxpayers are eligible according to their reference tax income, their place of residence and the nature of the work. Expenses are capped at 2,400 euros for a single person and 4,800 euros for a couple (plus 120 euros per dependant). The tax credit granted is a maximum of 75% of the expenses incurred.
5 – Tax reduction for donations
Many donations can be made at the choice of the taxpayer in favor of organizations of general interest or assistance to people in difficulty. Donations in favor of a political party or for the reconstruction of Notre Dame de Paris can also be taken into account.
The tax reduction granted cannot exceed 75% of the payments and is subject to a ceiling. We invite you to get closer to the causes that are close to your heart if you wish to make a donation, the organizations and associations are as numerous as the ceilings and reduction percentages obtained.
6 – The tax reduction for children attending school
Dependent children or children attached to the tax household and pursuing studies give rise to a tax reduction. For this, they must neither hold an employment contract nor be paid.
The amount of the tax reduction granted depends on their level of education:
- 61 euros in college
- 153 euros in high school
- 183 euros in higher education
7 – Opening a PER (Retirement Savings Plan)
The PER has replaced many existing schemes (PERP, PERCO, Madelin) and allows you to save for your retirement. Working like life insurance, the loss of funds depends on your level of risk taking. In euro funds, the risk is nil, whereas with units of account, it can be moderate to high.
Payments made to a PER are deductible from taxable income within the limit of 10% of net earned income and 10% of the Annual Social Security Ceiling PASS (i.e. 4,052 euros in 2019). The final tax reduction will therefore depend on your MTR Marginal Tax Bracket.
8 – Real estate investment under the Pinel law
By investing in an eligible area where rental demand is strong, you can benefit from the Pinel real estate scheme for the purchase of new housing.
In return for renting the accommodation, you benefit from a tax reduction that differs according to your duration of commitment:
- For a 6-year lease: 12% tax reduction
- For a lease of 9 years: 18% tax reduction
- For a lease of 12 years: 21% tax reduction
9 – Real estate investment under the Denormandie law
Extension of the Pinel law, the Denormandie device allows you to invest in an eligible area where the housing is dilapidated. You then buy in the old one and you undertake to renovate the property with a decent energy performance.
The tax reductions obtained with the Denormandie law are identical to those obtained with the Pinel system.
10 – The Girardin Industrial device
Investing in Girardin Industriel is a “one shot” device allowing you to save tax very quickly. In return for an investment in the overseas economy through an intermediary carrying out the tax arrangement, you obtain a tax reduction amounting on average to 10 to 20% of your initial investment.
This type of tax exemption is however not free of risks, a tax requalification as well as a loss of the investment are possible when the file is badly carried out or when the Overseas entrepreneurs go bankrupt.
There are of course other financial devices aimed at reducing the amount of your taxes. It is relevant to approach a wealth advisor to carry out an audit of your needs before tax exemption at the risk of losing capital.