As the end of the year approaches, it is time to do accounts and think about the Treasury . What you do not do until December 31 will weigh on you in April when the time comes to make the 2019 income tax return. And it is that the personal income tax is paid from one year to the next , so you still have time to take letters in the affair.
There are two ways to save on the tax return and with one you save much more than the other. The first and most common is to get it right when making the tax return and for this you can see here the key boxes to pay less taxes.
Also, the higher your income, the more you can save. Specifically, people with earnings below 21,000 euros can pay about 1,595 euros less. However, if your salary is around 30,000 euros, tax savings can skyrocket to 7,839 euros.
How to save that money on rent? Basically, getting ahead of yourself when doing personal income tax and starting up one or more of these 6 things that you can do before the end of the year to save on taxes.
Before continuing, you can start by simulating what your 2019 income will be like. The Tax Agency has a tool to do the calculations. Do the first test and then recalculate the result by adding one of the actions to pay less taxes that we tell you below.
Contribute more to the Pension Plan
Pension plans are a very useful tool to pay less in rent. And it is that the money you contribute to the plan will reduce your tax base, so that the more you contribute the less taxes you will pay.
The key question at this point is whether it pays to contribute to the pension plan to deduct. The trick at this point is that it compensates those who earn the most. In fact, if you earn less than 60,000 euros, the tax savings for investing in pension plans will be rather low. The reason is that the money you contribute to the plan is subtracted from your tax base and that the personal income tax is progressive (you pay more the more you earn).
If you have earned 25,000 euros and you contribute 5,000 euros, for the Treasury it will be as if you had only entered 20,000 euros. As the income in that strip is taxed at 30%, the tax savings will be 1,500 euros. However, imagine that you earn 80,000 euros and invest those same 5,000 euros. The tax savings will be 4,500 euros because from the 60,000 euros the rate you pay in rent is 45%.
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Take advantage of the deduction for housing
This formula for paying less taxes only applies to those who bought your home before 2013 . If this is your case, you can still apply the deduction for home purchase. With it you will save a maximum of 15% on a maximum basis of 9,040 euros.
This amount is maintained in both individual and joint declarations. For this reason, if you are married and the house belongs to both, opting for the individual declaration will ‘double’ the number. And it is that each one of you will be able to deduce on that maximum basis.
When adding what you have paid for the house, do not forget to add the insurance-linked to the mortgage. If you have not reached the maximum of 9,040 euros, you can advance more money to pay less taxes and save interest.
Here you can see if it pays you to pay off part of the mortgage before to pay less taxes. And it is that as an investment to pay less interest on the house it will usually be positive.
Find out if you want to offset investment losses with equity gains (even if you’ve sold the house)
If you invest there is a very powerful tool to reduce what you pay in personal income tax. This is the possibility of offsetting capital gains and losses. When making the income, the Treasury allows you to subtract the losses you have suffered from the gains you have made. This way you only pay for the real benefit.
If you plan properly, you can save a lot of money , especially if you sold your house in 2020 or if you plan to do it later without reinvesting the money (remember that if you reinvest the money in the house to buy another, you will not have to pay taxes on the profit you obtain ).
The trick is that by offsetting losses with gains, you avoid paying taxes on the profit you have made and thus save between 19% and 23% on rent.
As an example , if you have had to sell falling shares and have lost 1,000 euros, you can sell rising shares with a profit of up to 1,000 euros and you will not pay taxes on them.
In the case of housing, if you sell your house and have registered benefits, it can compensate you to recover some investment in losses to pay less. This is what is called bringing out handicaps.
The tax advantage is that you can carry those losses over four years and offset them in the personal income tax for the following four years. Likewise, 2019 income is the last opportunity to offset losses from 2015 that you have not been able to settle until now.
Make a donation also income in the Personal Income Tax
Donations have a tax award . When making the rent you will be able to deduct the part of the money destined for NGOs and certain functions. The amount will depend on what you give.
Specifically, you can deduct 75% of the first 150 euros you donate and 30% of the rest. In addition, from the third year donating to the same NGO, this percentage increases to 35%.
You can also deduct 10% of donations to other foundations and associations of public utility.
Lastly, donations should not be confused with donations.
If you have shares and are not required to make the rent , you should make numbers before selling. Remember that those who earn less than 22,000 euros with a single payer and 14,000 euros with two or more payers are exempt from declaring if they have paid more than 1,500 euros from the second or subsequent payers.
In these cases, care must be taken not to exceed certain limits of incomes other than work, such as income or self- employment. These are the figures to watch:
- Up to 1,600 euros for full income from movable capital and capital gains subject to withholding. Namely money from deposits, life insurance or the sale of second-hand products, for example.
- Up to 1,000 euros in real estate income imputed by real estate other than the habitual residence, yields from Treasury bills and subsidies for VPO or appraised price and non-exempt public aid.
- Up to 500 euros in capital losses.
In addition, if you are going to earn less than 16,825 in income from work (salary and pensions), it is important to ensure that you do not add other types of income such as profits from the sale of shares or rental income of more than 6,500 euros.
If there are, you could not apply the reduction for work income of 5,565 euros for work income of less than 13,115 euros. This reduction is maintained, although to a lesser extent until the aforementioned 16,825 euros.