€3,000 In Taxes: That Tax Exemption Solutions?
Faced with ever-increasing fiscal pressure, combined with ever-increasing inflation that is gradually weakening or reducing the value of the currency, French taxpayers who have to pay income tax are increasingly orienting themselves in addition to tax exemption products. Here are the ones available to them.
Why do you want to tax?
Of more than 37 million French households, just over 40% have to pay income tax. The average tax in France would be around €2,350 a year, which would bring in around €70 billion to the State. In reality, ¾ of this sum only comes from the 10% of the wealthiest taxable households, since the tax is calculated according to a progressive scale. The households concerned are therefore taxed on their income, after a discount linked to the level of resources, the number of children, the possible nature of celibacy if divorced or widowed, but also to the investments made and the use of tax loopholes.
When you are liable for €3,000 in income tax, it is very likely that this will exceed the national averages, which depending on individual situations, can correspond to a monthly executive salary, or even beyond by benefiting perhaps tax relief, particularly related to family expenses. Be that as it may, at nearly €300 per month in monthly tax payments, to which are added other taxes, perhaps property, household garbage collection, or even wealth tax, it It is quite natural to want to take advantage of the tax exemption schemes offered by the State.
Benefits of being accompanied by a professional
Whoever wants to be an expert in finance, so when it comes to defending your own interests, it may be a good idea to use the services of a professional, such as a wealth management advisor for example. Wanting to reduce tax is one thing, but it is an approach that is part of a more global scale of tax optimization. Some investments would be perfectly profitable fiscally speaking, but will ultimately cost more to the taxpayer, or will require investments at a loss, while others, perhaps less tax-exempt immediately, will offer capital gains and financial or real estate assets on the long term. The wealth management advisor will be able to give advice and guide choices according to market developments, laws, national, European and international circumstances.
Tax exemption solutions
The tax exemption procedures form a kind of satisfactory give and take. Through taxes, the State finances national security, education and research in particular. The tax exemption systems are put in place strategically to encourage French people with high incomes, which are therefore taxable, to invest in the economy, and in particular in sectors in need. This is why certain measures will encourage people to develop, rehabilitate and renew the national stock of private rental properties so as not to resort to social housing alone to overcome the real estate crisis, while others will encourage them to invest their savings in support funds for small and medium-sized enterprises, innovative or local sectors, or in support of charities of general interest. Here is a non-exhaustive list of the main existing tax exemption schemes.
Invest in real estate
Here are 6 real estate tax exemption processes that you can benefit from, depending on the capital you are able to invest in stone.
- The Pinel device: By investing in unfurnished housing, new or in the future state of completion (VEFA), with satisfactory energy performance, while respecting ceilings in the setting of the rent, but also on the resources of the tenants , it is then possible to take advantage of the Pinel system which offers progressive tax exemption according to the commitment made for the duration of the rental of the property: 12% of the amount of the investment for at least 6 years of rental, 18% for 9 years, and 21% for 12 years or more. The tax exemption will be spread over the rental period, and the calculation of the percentage will cap the amount of the investment at €300,000;
- The Denormandie device: The proposed tax exemption is identical to that of the Pinel device, but the property must be acquired in a state of indecency, presenting heavy rehabilitation work to be carried out, equivalent to at least 25% of the overall investment, and s as part of the national program “Action Coeur de ville” which aims to revitalize city centers by rehabilitating old and dilapidated housing. Obviously, the level of energy performance obtained after the work must be excellent to benefit from the tax exemption system;
- The Censi-Bouvard device: Here again, tax exemption is based on the same principle of progression according to the duration of the rental, on the same rates. Here, however, the accommodation must be located in a new and furnished residence, student or senior residence type for example, and rented on the system of a commercial lease. The investor therefore rents the property to an operator and is thus remunerated. The latter in turn rents to occupying tenants by setting a rent above the rent it pays to the investor. Thus, everyone is a winner;
- The Malraux device: This property tax exemption process is somewhat different from the three mentioned above. It must concern an old property acquired in a state of indecency defined by law, and be registered in the French historical and aesthetic heritage as a remarkable building. The preservation and safeguarding of French architectural heritage is welcomed by a tax reduction of up to 30% of the total amount of the work undertaken, for a compulsory lease for at least 9 years;
- The Société Civile Immobilière (SCI): Its constitution allows the acquisition of real estate by at least two people, each of whom becomes a partner. In fact, not being direct owners of the property, they hold shares in it up to their capacity for capital investment. This approach allows you to build up a heritage while being able to transfer your shares to your children as soon as they come of age, on their death, or otherwise. It is possible to deduct from its taxes all the expenses relating to the maintenance and maintenance in good condition of the dwelling. This generates a land deficit which then allows a tax reduction. Finally, the SCI allows the donation without the application of transfer duties and without having to pay donation fees as long as the value of the shares transferred does not exceed €100,000 per child and per fifteen years. ;
- The Société Civile de Placement Immobilier (SCPI): This is a good way to increase your assets by taking advantage of the associated tax exemption, but without bothering with the day-to-day management of the property. This is only an investment in stone, of which each investor holds a share in proportion to his investment. Two more advanced formulas for tax exemption: SCPIs in bare ownership which do not confer any property income therefore no calculation of the real estate wealth tax and no impact on income tax, or the SCPI of land deficit, which invests in buildings to be renovated, which generates a land deficit to be shared between investors up to their share, to reduce tax by creating charges.
Invest in Mutual Funds (FCPR)
Through Mutual Funds for Investment in Innovation (FCPI), or Local Investment Funds (FIP), both classified among Risk Mutual Funds, financial investment in Small and Medium-Sized Enterprises (PME) innovative and promising will be welcomed by the State with a reduction of 18% of the amount invested on income tax. This reduction rate will be increased to 25% depending on the percentage of investment in innovation or proximity, imposed at least 70%, but possibly up to 100%. The investor then becomes a shareholder of the company to the extent of his investment, and thus benefits from a share of the profits generated. It is therefore a largely profitable investment, in growth or largely promising sectors. However, this investment must be thought over the long term. The invested capital is blocked for at least 5 years.
Save on profitable products
There are dozens of existing savings products: Livret A, Livret Développement Durable et Solidaire (LDDS), Livret Epargne Logement (LEP), Plan Epargne en Actions (PEA), Capitalization contract, Company Savings Plan (PEE) , etc. Many are similar, and are distinguished either by the availability of savings, or by the type of profitability, or even by the destination of the funds saved. However, two products stand out from the pack, and are today the most subscribed:
- Life insurance: Taking out life insurance offers the possibility of saving the desired sums, designating beneficiaries in the event of death, which partially extracts inheritance tax, and benefiting from savings at any time on the life of the contract. Each payment made is tax deductible on entry, and considered outside the estate on the death of the insured, within the capped limit of €152,500 per beneficiary for those paid before the insured’s 70th birthday, and €30,500 to be distributed among all the beneficiaries for those paid afterwards;
- The Retirement Savings Plan (PER): Subscribing to a PER means securing financial savings for retirement, in the form of an annuity or capital, partly extracted from inheritance tax. The tax exemption is obtained by the deductibility of each payment made, within the limit of 10% of the annual net salary. This deductibility is not included in the ceiling for tax loopholes of €10,000. The disadvantage: the savings paid into it are blocked until the legal retirement age, except in the exceptional case of an accident in life or the purchase of the main residence.
Carry out renovation work
In its fight against energy losses generated by dwellings called “thermal sieves”, the State has set up a tax credit for owners wishing to improve the energy performance of their main dwelling only, by renewing the thermal insulation, by the installation of solar panels or photovoltaic panels, by the renewal of an oil boiler, or by the installation of a charging infrastructure for electric vehicles (IRVE). It corresponds to 30% of the expenses incurred, provided that a certified professional RGE (Recognized Guarantor of the Environment) is used. The energy transition tax credit, commonly called CITE, is capped over 5 years at €2,400 for a single person, and double that for a couple subject to joint taxation. It can be increased by €120 per dependent.
To make donations
To encourage donations, in support of the national associative fabric, the State returns part of it by reducing income tax, up to 66% of the amount paid, within the limit of 20% of taxable income. The donation must be made to a philanthropic (ethical), educational, scientific, social, humanitarian, sporting, family or cultural association. To allow the tax reduction, the association in question must be recognized as being of public utility, pursue a non-profit goal, present a disinterested management, have a social object, and not exist for the sole benefit of a restricted group of people. ‘people.
In the case of a donation to associations helping the most deprived, such as Restos du Coeur, the Red Cross, or Doctors Without Borders, the tax exemption will be increased to 75% of the sums paid. This amount will however be limited to €553, which has been increased to €1,000 over these two years of health crisis. Please note that a tax reduction does not give any right to a refund of the amount if it were to exceed the amount of tax due.