B Law & Tax
16 May 2023

Tax Advisor: Deductions in the Personal Income Tax return

When the time comes to file the Personal Income Tax return, the citizen must know which deductions he/she can apply for. Below, we will mention the main activities subject to deductions:

– In order to take advantage of the tax benefits of a pension plan, it is important to bear in mind that the contributions made to a pension plan are considered earned income in the income tax return. These contributions can reduce the taxable income at the time of filing the tax return. A few years ago, a maximum individual contribution limit of €2,000 was established for private pension plans, while the joint reduction limit (participant and company) was increased from €8,000 to €10,000 in corporate pension plans to boost corporate contributions and correct the inequality in these benefits.

– In order to obtain the tax deduction on a home mortgage, certain criteria must be met. The main requirement is that only homeowners who acquired their mortgage before January 1, 2013 can obtain the deduction, provided they have previously used this tax benefit in previous years. If they meet this requirement, they will be able to deduct up to 15% of what they paid in the year on a maximum base of €9,040.

– Contributions and payments to political parties, trade unions and professional associations may be tax deductible under certain circumstances. For membership fees and contributions to political parties, federations, coalitions or groups of voters, the deductible percentage is 20% with a maximum limit of €600 per year. In the case of dues to labor unions, the deductible percentage is 20% to 35%, with no limit on the amount to be deducted. Finally, dues paid to professional associations can be deducted up to a maximum of 500 euros. Membership in a professional association is mandatory for the practice of the profession.

– If a taxpayer makes regular financial donations to a non-profit entity, such as a foundation, he can obtain a tax deduction. A tax deduction of up to 80% of the first 150 euros donated and 35% of the excess of this amount can be deducted. These donations are made through monthly, quarterly or annual installments, 40% may be applied to the excess if they are recurring.

– The state tax deduction for rental housing is only available for contracts signed before 2015. However, in some autonomous communities tax deductions can still be applied. For the state deduction, the tenant listed in the rental contract can deduct 10.05% of the amount of rent paid, with a maximum limit of €9,040 per year.

– Each autonomous community has its own tax regulations regarding deductions. In general, some of the most common include expenses for school supplies, language courses, home help, adoption of children, care of dependents and home improvements.

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