The financial crisis, declining purchasing power … we are looking for ways to reduce our expenses, including taxes. Paying less taxes legally is possible. This is called tax optimization. If you do not know yet these strategies that allow you to optimize your taxation, it is time to discover them.
Tax optimization, what is it?
All your assets, be they real estate, professional or financial, are subject to taxes. They must, therefore, be declared to the tax authorities. Every year, all taxpayers are forced to pay their taxes that are calculated from a number of parameters. It is now possible to reduce these costs by implementing well-defined techniques.
Not to be confused with tax evasion which designates nonlegal methods to pay fewer taxes, tax optimization is a set of techniques that aim to reduce the tax burden without violating the laws in force. Optimization concerns both individuals and businesses.
As it is very easy to get out of the legality field when venturing into the world of tax reduction, it is advisable to be accompanied by an expert such as a tax expert, a financial analyst, an expert -accountable or an adviser in wealth management. Together, you develop the best strategy that fits your situation. But first, what are these strategies?
Alleviate taxable income
Taxes are calculated on a sliding scale that applies to the income received by the taxpayer from which an amount is deducted, the amount of which depends on a number of parameters, such as alimony, personal expenses, and family quotient.
Alimony, whether paid by check, by bank transfer or directly via invoices, is a tax-deductible expense. When you pay child support to an ascendant or descendant, you can benefit from a tax deduction if the procedure meets the required conditions.
First, the amount of the maintenance pension (s) must be clearly stated in the tax returns. The beneficiary must also declare the sum as additional resources. Resource conditions are also posted. The amount of the pension must be proportional to the needs of the beneficiary. The resources of the latter must not exceed the minimum wage.
It is also possible for a parent to detach his adult child from his tax home and pay child support to his destination. This means a drop in his taxable income.
The family quotient
When calculating the tax payable, the resources of the household are not considered. The number of people who make up the latter also comes into play. Thus, a person who lives alone, without charge, will not pay the same tax as a couple with two children even if their resources are identical.
The family quotient thus designates a tax advantage that is higher or lower depending on the number of people who make up the tax home or the social status of the taxpayer. It is evaluated in a number of “parts”. The higher the number, the higher the reduction in taxable income.
To pay fewer taxes, you can, therefore, attach to the taxa descendant or ascendant fiscally dependent.
The change in the family situation
A change in your family situation can have an impact on your taxes payable.
If you are married or pacs é, you have the choice between the joint declaration or the separate declaration. Weigh your choice because it can influence the amount of your tax. Do not hesitate to make simulations to know the most interesting option for your case.
A divorce or death can also lower or increase your taxes. The individual declaration becomes in these cases indispensable. Depending on the situation, your taxes may become lower.
A number of charges can turn into tax deductions. This is the case of actual costs or business expenses. Employees benefit from what is known as the standard abatement corresponding to the expenses they incurred in the exercise of their function. These expenses include but are not limited to, travel expenses, meal expenses, documentation fees, etc. This allowance amounts to 10% of taxable income.
If it turns out that the expenses are greater than the result of the application of the abatement, the taxpayer can choose taxation to the real, that is to say, ask that the calculation is made from the expenses real.
Pay less tax through tax exemption
To revive a real estate market or an economic sector that was facing difficulties, the state has put in place incentives known as tax exemption. In addition to real estate investment, we all know, there are other forms of less known tax exemption that you will see in the following lines:
Property tax exemption
First of all, what is the tax exemption? All the definitions you’ll find on Google or in encyclopedias talk about a tax cut. But how? Simply put, tax-free is to put money in a tax-free area to recover part of this amount of tax reduction.
The real estate tax exemption, therefore, consists of investing in the property affected by the system and in return for a tax reduction. Several tax exemption laws exist:
Pinel law: It shall apply from 1 January 2017 to December 2017. Replacing the old DUFLOT law, Pinel law concerns new housing for rental purposes. It offers the possibility of benefiting from a tax reduction of up to € 63,000 over a period spread over 12 years. The rate applied is 21% of the amount of the acquisition.
The Bouvard law: it targets, in particular, the residences of services of type Ehpad, residences students or residences of business. Applicable since 2009, the Bouvard law follows the Scellier system. In addition to the reduction of the income tax which amounts to 11% of the realized investment, it also allows you to recover all of your VAT.
The Lmnp (non-professional furnished lessor): by investing in real estate and choosing the status Rented Furnished No Professional, you can also enjoy tax benefits in the form of tax reduction. The rents you receive are exempt from direct taxes.
The Malraux law: this year again, enjoy the tax benefits provided by the Malraux law. It concerns the purchase of a property to renovate. In other words, the tax reduction that you could benefit from is taxed on the number of renovations that you will realize. The aim of the Malraux scheme is to fight against the disappearance of historic districts and to promote the restoration of old housing.
The new law Cosse: today known as Affordable Rent, this law of tax exemption allows you to benefit from a tax abatement by proposing reduced rents. The reduction is of the order of 15% to 75% depending on the amount of rent and the area where the property is located.
Other forms of tax exemption
There are other forms of tax exemption including:
Investing in the capital of an SME: by buying shares in an SME or by investing in the capital of your own company, you will be entitled to an 18% tax reduction limited to € 50,000 for singles and 100,000 € for couples. The investment can be made as part of the formation of the company or during the increase of its capital.
Be aware that if you invest in a finance company in the film industry, your tax reduction rate is 30%.
Investing in an investment fund: unlike units that are individual investments, the investment fund is a collective investment scheme bringing together the money of several investors. By investing in an investment fund such as a FIP (local investment fund) or an FCPI (innovation mutual fund), you can benefit from an 18% tax reduction € 24,000 for a couple and € 12,000 for a single person.
Investing in the capital of a press company: taxpayers who decide to invest in the capital of a press company subject to the tax can also today benefit from a tax reduction of 30% of the amount of the subscription.
Doing work to pay less tax
Do you plan to renovate your main home to improve its energy performance? To encourage you to get started, the state has put in place an incentive measure, better known as the CITE (tax credit for the energy transition). Thus, the decision to do work in your home leads to a double advantage: that of improving your home and that of benefiting from a tax break by paying fewer taxes.
This measure was introduced from 1 September 2014 and replaced the ICSD (tax credit for Sustainable Development). The tax reduction you can claim is 30% of the amount of the work. This is limited by a cap: € 16,000 for couples and € 8,000 for single people.
Pay less taxes by donating
Making donations for the benefit of an association of general interest or recognized public interest also allows benefiting from a tax deduction of 66% of the amount paid. Donations to organizations assisting people in difficulty are subject to a different regime. The tax reduction represents 75% of the sums paid up to 530 €. Beyond this amount, the reduction rate is 66%.
Donations can take different forms: cash, checks, funds, SICAV, shares …
Lowering taxes by saving
Many may not know it, but putting money into savings also helps lower taxes. This solution makes it possible to reduce the tax base by 10% of the amount invested in savings.
Among the solutions that offer you the opportunity to pay fewer taxes is the stock savings plan. Opening or supplying a PEA gives you a tax reduction. This mechanism that encourages you to invest in the stock markets at the same time has another advantage. Beyond 5 years, your capital gains benefit from an exemption.
Opening or contributing to a popular retirement savings plan (PERP) also entitles you to a tax reduction. On the one hand, you put money aside to build up additional capital once you retire. On the other hand, this device allows you to reduce your tax base.
Finally, investing in life insurance also allows you to benefit from a favorable tax system. The tax rate decreases with the duration of the contract. In addition to reducing or even eliminating the capital gains tax, life insurance is also an interesting tool for preparing your estate.
Perform energy saving work
Since 1 September 2014 appeared the CITE or tax credit for the energy transition. This device replaces the former Sustainable Development Tax Credit (SIDC). It allows you to deduct from your tax revenue 30% of the costs that you incur for carrying out energy saving work in your home. However, a ceiling is set at € 8,000 for a single person and € 16,000 for a couple. To take advantage of this tax benefit, the work must be done by an RGE certified company.
Become an employer at home
Employing a home-based employee can also benefit from a reduction or a tax credit. These jobs mainly concern personal services or home help such as cleaning, meal preparation, gardening, childcare, etc.
The tax benefit rate is 50% of wages paid in one year. These must not exceed € 20,000 for disabled people and € 12,000 per year for the rest.
Minimizing taxes using legal techniques is certainly complex, but not impossible. Through this article, you have been able to know the different methods of tax optimization. They help you pay fewer taxes while teaching you how to better manage your wealth. All you have to do is apply them!