How to Reduce Your Taxes?

Summary

  • 1 How do you reduce your income tax in 2020?
    • 1.1 Consider deferring your income
    • 1.2 Transfer part of your income to your children
  • 2 Investing in real estate can help you reduce your taxes in 2020
  • 3 Productive investment, another possibility for tax deduction
  • 4 How can you reduce your real estate wealth tax (IFI) in 2020?
  • 5 Make a donation to a foundation to reduce your taxes in 2020

In this new publication, we will see how to legally reduce taxes. In 2020, most French people feel they are paying too much tax, regardless of the type of tax. However, whether it is income tax or real estate tax, there are several tips to help you legally reduce your taxes. Decreasing income, real estate, or productive investment, here are some solutions to help you pay less tax in 2020. How to reduce income tax in 2020?

Consider deferring your income

Instead of receiving all your income, you have the option to invest part of it to reduce your taxes. There are several devices:

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  • the EPE (company savings plan): this is a collective savings system that allows employees to invest sums paid by themselves (voluntary contributions) or by their company (profit-sharing, donations, etc.). These amounts are frozen for 5 years, except in exceptional cases (acquisition of the main residence, marriage, etc.). At the time of their release, these amounts are tax-exempt.
  • the RAP (retirement savings plan) is accessible to everyone and exists in three forms: individual (also called PERI, you will find information here), collective, or corporate. Contributions made to these accounts are not taxable and will be paid out at retirement as a capital withdrawal or annuity.

Transfer part of your income to your children

If one of your children is pursuing higher education and is detached from your income, you can help finance their studies by opting for a temporary donation of usufruct to a notary. During this period, the amounts you pay them will be deducted from your taxable income.

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What devices should I use to reduce the rating?

Investing in real estate can help you reduce taxes in 2020

To address the housing shortage in France, the state has established several tax deductions to encourage investors to engage in real estate rental.

  • Pinel Law for investments in new and tight areas
  • Denormandie Law for the purchase of old housing to renovate.
  • Malraux Law for any investment in a classified building intended to be rehabilitated into housing.
  • the Censi-Bouvard law for furnished apartments in residences offering services to students or the elderly.

The operation of each of these schemes is similar: in exchange for the investor’s commitment to rent their properties, the state offers a tax deduction proportional to the purchase price of the property. For more information on these devices, visit the government website in the “Tax subsidies dedicated to housing” section.

Reminder: on PAB-Patrimoine, we recommend investing more in housing with renovation work to bring a notable improvement to the property: buy below the price of your real estate market, obtain latent added value, achieve a higher final return. Depending on your tax level and many other criteria, the Pinel scheme can be interesting; this should be studied with an expert.

Productive investment, another possibility for tax deduction

To encourage the French to invest in French companies, the state has implemented several measures to reduce taxes. In 2020, taxpayers have the option to invest their savings in FIP (local investment funds) or FPCI (innovation mutual funds) and benefit from a tax credit of 18% of their investment. In overseas departments and Corsica, the tax credit reaches 38%.

Financing companies for cinema and audiovisual (SOFICA) are also a way to support a business in this sector while benefiting from a tax reduction of 36%. Please note, however, that there is no guarantee and there is a risk of capital loss that you must keep in mind before starting with full knowledge of the facts.

How to reduce your real estate tax (IFI) in 2020?

If you are taxable under IFI in 2020, there are also ways to benefit from exemptions for this tax.

If you own significant real estate and your children are of age, consider creating an ICS to take advantage of its benefits. You will be able to give them shares of your real estate and not pay IFI only on the shares you retain. As for your children, they will be exempt from paying IFI if their respective shares do not exceed a net value of 1.3 million euros.

Investing in rural land can also help you reduce your IFI. VPG (wine-growing land groups) or woods and forests allow you to deduct between 50 and 75% of the amounts invested from your taxable base.

Make a donation to a foundation to reduce your taxes in 2020

You can make a donation to recognized public interest foundations, whose role is to raise funds for various causes: cancer research (such as the Gustave Roussy Institute), underprivileged families, sick children, etc. You can benefit from a tax deduction of up to 75% of the amounts paid to these organizations, within a limit of 50,000 euros per year.

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Tag : Taxes and tax exemption

How to Reduce Your Taxes?