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Practical advice to save up to 4,500 euros in the next income tax return

21 Dec
Symbolic Monday December 21st, 2020 0

The Technicians of the Ministry of Finance (Gestha) ensure that taxpayers have room to save on income tax returns if they know how to take advantage of the tax advantages established by the treasury.

In fact, they calculate that it is possible to reduce the tax bill by more than 4,500 euros on average, although it points out that the main beneficiaries are high income and large assets, since they have more savings to allocate to improve the result of their next statement. For a person who earns less than 21,000 euros a year, the approximate savings would not reach 1,700 euros. These are not negligible amounts if we take into account that we are in the midst of the economic crisis due to the covid-19 pandemic.

Regardless of the income level, the Gestha study reviews some of the best-known tax credits, such as the deduction for investment in housing for those who bought a house before 2013, that of contributions to pension plans, or those of donations to non-profit organizations or political parties. We review each of them:

  1. Squeeze the deduction for investment in housing

One of the tax advantages that remains for those who bought a home before January 1, 2013 is to be able to apply a deduction of up to 15% of the amounts contributed during the fiscal year, with a maximum of 9,040 euros. This means that the taxpayer can recover up to 1,356 euros for this concept. Therefore, the advice is that, if you pay less than 9,040 euros a year for the mortgage loan and you have some liquidity, you can amortize and get the Treasury to return up to 15% of that extra contribution.

  1. Neutralize the taxation of profits from selling a main home

For the purposes of taxation of capital gains, Gestha emphasizes that the General Budget Bill establishes a new rate for the case of taxable bases of savings exceeding 200,000 euros and that it will amount to 26%.

For those who sold their house this year, the profits obtained will be taxed in the next income statement, depending on their amount, between 19% and 23%, in the Basque Country Councils between 20% and 25%, and in Navarra between 20% and 26%. However, if the amount is totally or partially reinvested in another regular home, it will be possible to neutralize this payment.

  1. Hire a life annuity if you are over 65 and sell a property

The study of the technicians also insists that the profits obtained from the sale of the habitual residence by taxpayers over 65 years of age or by severely dependent persons or large dependents are exempt from taxes, although in Navarra the exemption of the profit is conditioned that its provision serves to meet the economic needs of old age and dependency, and in the Basque Country it is limited only to those over 65 years of age for the first 400,000 euros of profit. And in these last provincial territories for a single transmission.

Likewise, the gains obtained by those over 65 years of age from the sale of any asset are exempt from taxation, as long as the total amount, up to a maximum limit of 240,000 euros, is used to constitute an insured life annuity within six months. In Navarra since 2020 it also applies, as in Bizkaia and Álava, although this exemption does not exist in Gipuzkoa.

  1. Make an extra contribution to the pension plan

Gestha reminds that it is convenient to make contributions to the pension plans or to the insurance plans insured in the final stretch of the year. However, he warns that “this year will be the last in which the income tax base can be reduced to 8,000 euros, provided that these contributions do not exceed 30% of the income from work and economic activities, because the Bill of the General State Budget for the year 2021 plans to reduce this limit to 2,000 euros, maintaining the percentage limit of 30%. For this reason, if you plan to make this type of contributions, it is preferable not to delay them until 2021, since if they are contributed from January the limit will be 2,000 euros.

Likewise, Gestha clarifies, contributions to spouse pension plans made by the taxpayer when the taxpayer receives income from work or economic activities lower than 8,000 euros also reduce the tax base to 2,500 euros. As in 2021, the contribution limit will be reduced to 1,000 euros, it may also be convenient to advance these contributions before the end of the year.

In general terms, the Finance Technicians calculate that investing another 6,233 euros on average this month to reach the limit of these contributions guarantees an average tax saving of an additional 1,870 euros, this additional saving varying according to the amount of income and the community autonomous residence.

  1. Losses are offset by gains on investments

Being an investor in the stock market can not only bring profits, but also losses. Therefore, the study recalls that the end of the year is a good time to do accounts and offset the losses generated by an investment fund, stocks or financial derivatives with the equity gains obtained. “Here it is important to remember that those same or similar securities cannot be acquired in the two months after the sale,” says Gestha.

On the other hand, the tax reform eliminated watertight compartments to offset returns on movable capital with capital gains and losses, that is, from 2015 on, capital losses are allowed to be offset, in the event of no gains, with positive returns. of movable capital and vice versa. The percentage of state compensation and in Navarra will be 25%. In the Basque Country, the compensation of movable capital income and capital gains and losses remains stagnant, although the positive and negative balances of movable capital and capital from housing can be offset against each other.

At the same time, there is an optional regime between the calculation of the capital gain or between a special tax of 3% of the value of the transfer of securities up to 10,000 euros in each year for the set of securities transferred.

“Therefore, if there were a positive return on movable capital, it would be advisable to study the materialization of losses on the sale of shares and other equity products. And if there were capital gains, it would be convenient to compensate them with negative returns on movable capital ”, the Finance Technicians insist.

  1. Plan ahead for the sale of shares

Taxpayers who foresee that their net income from work will be less than 16,825 euros should monitor, as far as possible, that there is no income of another type, such as capital gains from the sale of shares or income from real estate rentals, higher to 6,500 euros, since in that case they would lose a reduction in income from work that can reach up to 5,565 euros.

Also the sale of shares may force many taxpayers to declare that they would not have the obligation to declare with income of less than 14,000 euros with more than one payer (in Navarra 12,600 euros and in the Basque Country, 12,000 euros), or if there is only one a payer up to 22,000 euros to workers residing in the CCAA of common regime (or more payers for less than 1,500 euros in total). In the Basque Country the limit is 20,000 euros.

  1. More deductions for donations

The study recalls that the Government approved in May an increase in the tax relief on donations with effect from January 1, 2020, up to 80% of the first 150 euros donated and 35% of the rest of their contributions, which increases to 40 % if the amount donated to the same NGO has not decreased in each of the last three years.

Donations to the Public Treasury made for the exclusive financing of expenses derived from the health crisis caused by covid-19 will enjoy this regime of increased rates, which will mean 80% for the first 150 euros and 35% for the rest .

In addition, capital gains generated if goods are donated are still exempt. In the event that donations are used to carry out and develop priority patronage activities and programs, the above percentages rise by five percentage points. Hence, in this final stretch of the year, it is recommended that taxpayers request the certificate with their identification data, date and amount donated to solidarity entities.

It is also possible to deduct 10% for donations to other foundations and associations declared of public utility not covered by Law 49/2002. In the Basque Country, the deduction is 30% for foundations or entities covered by the Foral Rules regulating the tax regime of non-profit organizations and tax incentives for patronage. In Navarra, on the other hand, the deduction is 25% for entities covered by the Foral Law that regulates the tax regime of foundations and sponsorship activities, where donations made by parents to “teaching cooperatives of the concerted centers ”in which their children study.

  1. Deductions for contributions to political parties and professional associations

Membership fees and contributions to political parties can bring the taxpayer some additional benefit, since they involve a deduction of 20% (in Navarra it is 15%), limited to a maximum base of 600 euros.

In the Basque Country there is an unlimited deduction of 20% of the membership fees and contributions to political parties, except for the amounts obligatorily contributed to their political organization for popularly elected or freely appointed political positions that have deducted 25% of the full income of the aforementioned job if they represent the main source of income for the taxpayer. Also in the Basque Country they deduct 20% from the fees paid to workers’ unions, and in Navarra 15% with a maximum limit of 600 euros per year.

In the rest of the country, compulsory union and professional association dues deduct up to 500 euros from work income, and legal defense expenses for disputes in the employment relationship with a limit of 300 euros per year.

  1. Incentives for helping nearby entrepreneurs.

For another year, the third-degree friends and family of the entrepreneur who wants to set up his own company have a tax reward. Since 2013, the personal income tax law established an incentive in favor of ‘business angels’ or people interested in contributing capital to start an activity or ‘seed capital’, so that new companies can be created by incorporating their shareholders, within the three years from its constitution, to these investors who must maintain their participation between three and 12 years.

“The deduction for these investments is 30% in the state share of personal income tax of the investment made when subscribing the shares or participations of the company, the maximum basis of the deduction being 60,000 euros per year, limited to one participation, together with their spouse and family members up to the second degree included, never exceeding 40% of the entity’s capital and whose equity may not exceed 400,000 euros at the beginning of the entity’s period in which the investor acquires the shares. Likewise, the total exemption of capital gains is fixed when leaving the company, as long as it is reinvested in another entity of new or recent creation “, explains Gestha, who maintains that currently” this deduction is the second most powerful of personal income tax allowing deduction additionally 1,157 euros on average for those who finance a recent company, although it is necessary to invest another 3,857 euros, which makes it the most profitable deduction on average in personal income tax with respect to the amount invested for high income, after the plans of pensions ”.

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