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How to save on your income tax return

by Dec 30, 2023tax consultancy0 comments

Do you want to pay less tax on your income tax return? If so, it is in your best interest to plan your actions before the end of the year, as there are some measures you can take to reduce your taxable income and, therefore, your tax liability. In this article we give you some tips to save on the Renta, but remember that it is always advisable to consult a professional tax advisor.

– Contribute to a pension plan: one of the most common ways of saving in the Renta is to make contributions to a pension plan, since these reduce the general taxable base up to a limit of 8,000 euros or 30% of the net income from work and economic activities, whichever is less. In addition, if your spouse has no income or less than 8,000 euros, you can contribute up to 2,500 euros more to his or her pension plan and deduct it from your taxable income.

– Amortize your mortgage if you bought before 2013: if you bought your primary residence before January 1, 2013, you can deduct 15% of the amounts paid for the acquisition or rehabilitation of the same, with a limit of 9,040 euros. This includes interest and principal amortization of the mortgage loan. Therefore, if you want to take full advantage of this deduction, you can early amortize part of your mortgage before the end of the year, as long as you do not exceed the annual limit.

– Buy an electric car: if you are thinking of changing your car, one option that can help you save on your income tax is to buy an electric or plug-in hybrid vehicle, as these have a 30% reduction in the net income from work if used for work purposes. In addition, you will also benefit from other advantages, such as fuel savings, access to restricted areas or road tax rebates.

– Make donations to non-profit entities: another way to reduce your taxable income is to make donations to non-profit entities that are under the special tax regime of Law 49/2002, such as NGOs, foundations, associations, etc. These donations have a deduction of 80% on the first 150 euros and 35% on the excess, with a limit of 10% of the taxable income. In addition, if you have been donating to the same entity for at least three years, the deduction percentage increases to 40% on the excess of 150 euros.

– Wait until you are 65 years old to sell your home: if you are over 65 years old and sell your primary residence, the capital gain you obtain is exempt from income tax, provided that you have effectively and permanently resided there for at least three years prior to the sale. If you sell a home other than your primary residence, you can also exempt the gain if you reinvest the total amount obtained in an insured annuity, with a limit of 240,000 euros and a term of six months.

– Reinvest in another home if you sell yours: if you sell your primary residence and you are not over 65 years old, you can also avoid paying tax on the capital gain if you reinvest the total amount obtained in the purchase or rehabilitation of another primary residence, within a period of two years. You can also apply this exemption if you sell your primary residence to purchase another one abroad, provided that it is your primary residence.

These are just some of the tips you can follow to save on your income tax return, but there are many more. The important thing is that you plan your decisions in advance and that you consult a tax expert to guide you on the best options for your case. This way you can optimize your taxation and pay only the right amount.

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