From what tax bracket can we start tax exemption?

 From what tax bracket can we start tax exemption?

To defiscalize is to invest in a service, a product, an investment, in order to reduce, or even cancel, legally the amount to be paid during its income tax.

But to reduce tax, you still have to pay taxes on the one hand, and have the means to invest on the other. A single person with 2,000 euros in net monthly income and a couple with two children and 5,000 euros in net monthly income will not be exempt from tax in the same way.

Depending on your tax bracket, we give you effective ways to reduce tax effectively. Your sensitivity to risk will do the rest!

To begin with, what is the TMI, Marginal Tax Bracket?
The TMI you are subject to corresponds to the tax rate applicable to you based on your taxable income. This is calculated by adding up all your household income (employees, non-employees, property, dividends, etc.), then subtracting the deductible expenses (allowances, professional expenses, charges), and finally dividing the figure obtained by your family quotient (1 share for a single person, 2 shares for a couple, 2.5 shares for a couple with a child, etc.).

In concrete terms, to find out your TMI, the easiest way is to do an online simulation via the tax website, or consult the amount of your RFR Reference Tax Income on your last tax notice. It is according to this that you are taxed by “slices”:

  • 0% up to €10,084
  • 11% from €10,085 to €25,710
  • 30% from €25,711 to €73,516
  • 41% from €73,517 to €158,122
  • 45% from 158,123 euros

Thus, with a reference tax income of 40,000 euros, your TMI is 30%. And you have an amount of income tax to pay of 6,005.86 euros:

  • 0 euros up to 10,084 euros
  • €1,718.86 up to €25,710: (25,710 – 10,084) x 11%
  • 4,287 euros from 25,710 euros to 40,000 euros: (40,000 – 25,710) x 30%
  • That is a total of 6,005.86 euros to be paid: (1,718.86 + 4,287)a 

Fortunately, the various tax exemption techniques will help you pay less tax!

When does tax exemption make sense?

Contrary to a too often widespread idea, it is not necessary to be part of the richest 20% of French people to think about tax exemption. Indeed, whatever your income and your age group, tax exemption is available to you.

It is above all the relationship you have with money, your available savings and your investment objective that will determine the choices you will make in terms of taxation.

Thus, it is interesting to learn about tax exemption at any time, to take advantage of market opportunities according to your profile and to know the successive reforms is possible.

Even if it is often more appropriate to detax from 2,500 euros of net taxes per year, there is no strict rule in this area.

Can we defiscalize without being taxable, with a TMI of 0%?

When you do not pay tax, you cannot deduct tax in the true sense of the term, since there is no point in having deductions. On the other hand, you can still think about the tax credit.

Indeed, the tax credit is an amount returned by the tax authorities, which therefore increases your purchasing power. Here are some tax credits you could take advantage of:Tax credit for childcare expenses

  • Tax credit for employment of an employee at 
  • home (school support, meal preparation, cleaning, gardening, computer assistance, etc.)

And why not invest this tax credit in an investment, such as an LEP Livret d’Épargne Populaire, life insurance, in order to have more savings in the future? 

Tax exemption with a TMI of 11%

With a marginal tax bracket, you pay between 1 and 1,719 euros in tax per year. That is up to 143 euros per month. What would you say to abolishing this tax to put it to good use in what is most important to you?

You can of course claim the tax credit mentioned in the previous paragraph, but also the following tax reductions:

  • Donate to associations for a tax reduction of 66% to 75%
  • Donate for the restoration of Notre Dame de Paris
  • Take advantage of tax deductions for children attending college, high school or pursuing higher education
  • Helping a loved one in a situation of dependency by housing them

 And if you want to grow your wealth, you can start investing in one of the following schemes depending on the amount of tax you have to pay:

  • Open a livret A or an LDD Livret de Développement Durable if you are no longer eligible for the LEP to have cash
  • Open a PER Retirement Savings Plan to deduct up to 10% of your earned income and lower your tax while preparing for your future
  • Open a PEA Plan d’Epargne en Actions and be exempt for your income from assets
  • Invest in a studio at 100,000 euros eligible for the Pinel or Denormandie laws to benefit from property income and obtain a tax reduction of 12% to 18%, proportional to your investment

 Tax exemption with a TMI of 30%
With a marginal tax bracket of 30%, you have every interest in tax exemption, since the amount of your tax is at least 1,720 euros and can climb up to 16,060 euros, i.e. up to 1,338 euros per month. .

Take all the tax credits and reductions mentioned in the previous paragraphs, and document yourself as much as possible on the Pinel and Denormandie laws, especially if you have not yet invested in stone. These tax exemption schemes should see their tax advantages drop in the years to come, so take advantage of them now.

In addition, you can also consider the following tax exemption schemes depending on the weight of your tax on your household budget:

  • Industrial Girardin for the development of the economy in Overseas France
  • Forest or wine-growing land groups, for remuneration in kind to expand your wine cellar
  • Investment in companies via FCPI, FIP, SOFICA and other solidarity investment program

But beware, special attention should be paid to the choice of these tax exemption devices, because not all are equal. In addition, it is necessary to keep in mind the overall cap on tax loopholes, limited to 10,000 euros per year and per tax household, or 18,000 euros with Girardin and SOFICA investments.

Tax exemption with a TMI of 41% or 45%

You are one of the richest French people, but also the most heavily taxed. The amount of your income tax is between 16,061 euros and several tens of thousands of euros per year.

At this stage, you must opt ​​for a real tax exemption strategy taking up all the devices mentioned above to combine them with each other. Very often, these are not enough to completely exempt you from taxes, in particular because of the caps applicable to tax loopholes.

In addition, you will have to choose between the LMNP or LMP (Professional Furnished Rental Company) status depending on your appetite for investing in real estate, your income and your interest in other tax-exempt or non-tax-exempt investments.

It will therefore be necessary to diversify your heritage as much as possible to make it grow in your interest and that of your family, to think about its development and its transmission. 

 In any case, when you are in the 11% marginal tax bracket and become close to the top bracket, or when you are in a 30%, 41% or 45% marginal tax bracket, the remedy to a wealth manager is strongly recommended to diversify your assets in a balanced way, optimize your returns, and reduce the amount of your tax in the long term.