We would all like to have the opportunity to pay less tax each year. Many people know that this is quite possible, but few know the means to achieve it. Investing in real estate, carrying out work to reduce energy consumption, having children, hiring a person at home or even subscribing to a retirement savings plan, here are some tips for lowering your taxes and deducting certain expenses on your statement.
Because of the crisis, we often say that we must invest in stone. This is a very good thing because the government has introduced real estate tax exemption laws that allow people who invest in real estate to reduce their income tax.
The Pinel law was introduced in 2015 and replaced the Duflot law, which was the real estate tax exemption law that came into effect in 2014. The Pinel law has kept certain principles by making them more flexible in order to be able to extend their impact. The principle is simple, and is the same as that of the Duflot law: the State reimburses a significant part of your purchase in tax reduction when you invest in new housing in a high demand area and respecting certain conditions. The accommodation must however be BBC (low consumption building) so that you can benefit from this tax advantage. This law thus makes it possible to deduct nearly 21% of the maximum price of two dwellings per year. However, this investment has a limit since it cannot exceed a total of €300,000. The tax reduction can be spread over six to nine years, and in some cases extend to twelve years.
In case you prefer to invest in furnished real estate, there is another law, the Bouvard law, which can allow you to benefit from 11% tax reduction. In addition, it is also possible in certain cases to recover VAT.
Since September 1, 2014, the CITE (tax credit for energy transition) has replaced the CIDD (sustainable development tax credit). The CITE allows you to have the possibility of deducting from taxes certain expenses incurred as part of the energy renovation that have been carried out over the last two years in your main residence. However, it is important to know that this work must be carried out by an RGE-certified company.
Having one or more children lowers taxable income, and therefore lowers your taxes! Indeed, up to two children, each child gives the right to a half tax share, and from the third, each child gives the right to a full tax share. The higher the number of tax units for the same income, the lower your income tax. All you have to do is tick the corresponding boxes with the year of birth of your children on your tax return. This principle is also valid for other taxes such as housing tax.
It can also be fiscally advantageous to employ an employee at your home for tasks such as cleaning, childcare, home support, gardening, or home help (for the elderly). These jobs are paid directly by the employer and allow you to benefit from a tax reduction. Indeed, up to 50% of the expenses can be returned to you, even if you do not pay taxes! On the other hand, these expenses must not exceed 12,000 euros per year except in special cases (for example, they can go up to 20,000 euros for disabled people).
The use of service employment vouchers allows you to benefit from the same tax reduction conditions.
Retirement savings plans also offer certain tax advantages.
The PERP (popular retirement savings plan) allows the sums paid into it to be deducted from income tax. However, these amounts are limited to 10% of income related to professional activity or 10% of the annual social security ceiling.
The Madelin contract is intended for self-employed workers and allows them to deduct the contributions paid by the insured. They are also limited to 10% of the taxable profits made and eight times the amount of the annual Social Security ceiling.
On the other hand, some retirement savings plans, such as the PERCO (collective popular savings plan) do not entitle you to any tax advantage.
It may be useful to know that if the total amount of your deduction is not used in one year, the balance can be carried forward the following year and in the three years that follow.
You now know the main tips that can help you lower your taxes!