INCOME TAX CREDITS AND INCOME TAX REDUCTION
Income tax credits and reductions explained: learn how they affect your tax liabilities, examples of eligible items, annual ceiling limits, and tax reductions on capital subscriptions. Discover the benefits and rules for claiming tax advantages.
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INCOME TAX CREDITS AND INCOME TAX REDUCTION CRYPTOCURRENCIES Sakis Elisseou NLE Conseils 30 November 2022
Income Tax Credits The amount is deducted after the Tax calculation. If the credit is higher than the Tax due, the excess amount is refunded to the tax payer examples housecleaner, donations etc. Income Tax Reductions The amount is deducted after the Tax calculation. If the reduction is higher than the Tax due, the excess amount is lost examples Private Pension Contributions (PERP), Alimony payments etc.
Annual Ceiling for Tax Credits and Reductions Niches Fiscales For 2022 each household can only claim up to 10,000 annually in Tax by claiming tax reduction/credit Example : During the year the household had a Tax credit of 6,000 by having a house cleaner and 5,000 Tax reduction by investing in Pinel Total tax advantages are equal to 11,000 . The amount will then be limited to 10,000 . The excess 1,000 can be claimed in the following year for up to a maximum of 5 years
Examples of Tax Credits and Tax Reductions items Examples of Tax Credits and Tax Reductions items Object Credit/Reduction Ceiling Apply Cost for employing a personnel in the house Cost for looking after children under 6 Energy Saving installation cost Investment in property Investment in forestry Capital subscription to SOFICA - Cinema Capital subscription to SME Investment in French Overseas Territories Journals Subscription - min 12 months Establishment cost for staying in nursing home Charitable Donations Looking after a person over 75 or disable Trade Union Subscription - limited 1% of the salary Alimony Payment C C C R R R R C C R C C C R YES YES YES YES YES YES YES YES YES No No No No No
Tax Reduction on Capital Subscription on SME The company has to have less than 250 employees or Turnover of less than 50m ; Not to be in administration; Has to been created less than 7 years ago; Situated in France or in the EU or EEA; Trading company Minimum 2 employees at the end of the following year after the subscription; Not to listed in a regulated market; Keeping the shares for least 5 years subject to other conditions. Maximum Tax Reduction per year is 50K for a single person or 100K for a couple. The Tax reduction equals to 25% of the subscription.
Tax Credit for employing a person in the house cleaner, gardener nanny etc The Tax credit is equal to 50% of the annual cost up to the limit of 12K plus 1,500 /child max 15K per year. Max 20K if there is a disabled person in the house. Tax reduction for children at school or higher education For each child in Coll ge the Tax reduction is 61 For each child in Lyc e the Tax reduction is 153 For each child in higher education the Tax reduction is 183
Tax Reduction on Pinel/Duflot investments The Total Tax reduction is equal to 12% or 18% of the initial investment (accordingly if the tax payer is engaged for 6 or 9 years respectively) ie 2% per year In place until 31.12.2021, however it was extended up to 31.12.2024 for an additional total Tax reduction equal to 6% if engaged for 6 years and 3% if engaged for 9 years. For the 6 years there was a 2nd extension to arrive up to 31.12.2024 and the total tax reduction of 3% Overall, the total Tax reduction in both 6 and 9 years including the extensions is 21% The investment is limited to 300K per taxpayer per year
Tax Relief on losses from trading/investment activities Losses from Professional trading activities can be off set against global income. Example BNC or LMP Losses from Non-Professional trading activities cannot be off set against global income, and will instead be utilised against future profits of the same activity with the 10 years limit. Example LMNP
Cryptocurrencies Cryptocurrency is virtual money bought and sold via the internet For both individuals and traders, it is important to keep records of purchase dates and cost, sale dates and amounts and if selling only a part of your cryptocurrency portfolio, the value of the portfolio as at the date of sale Cryptocurrency accounts need to be declared in form 3916
Cryptocurrencies Cryptocurrency gains and losses must be declared on form 2086, transaction by transaction Gain is realised only on transactions where you have sold the cryptocurrency in exchange for legal currency (FIAT). If you are just exchanging currency from one type of cryptocurrency to another, for example selling Bitcoins to buy Ether, there is no need to declare these transactions.
Cryptocurrencies Tax is calculated on the total gain of each transaction and is taxed at a flat rate of 30%. This is made up of 12.8% tax and 17.2% social charges The Gain is declared in Box 3AN on the tax return and the loss in box 3BN in the 2042 form If the total gain for the year is less than 305, then there is no need to declare the gain. You can deduct the cost of selling the cryptocurrency from the gain made From 01/01/2023 individuals can opt to choose to pay tax on a progressive scale, if it s more fiscally advantageous
Example of part disposal of the portfolio If you sell only part of your cryptocurrency portfolio, then you are taxed on the % of the portfolio which has been sold. For example: If you sell 10,000 in Crypto, and this represents 10% of you portfolio at the moment of the sale. The capital gain is calculated as 10% of your total portfolio. Example : I purchased 5 Filecoins for 5,000 in January 2021 In March 2021 I decided to sell 2 Filecoins for 3,000 (ie 1,500 each) The Capital Gain calculation is as follows: Value of my Total portfolio in s = 5 x 1,500 = 7,500 As a % the disposal represents 3,000 / 7,500 = 40% of my portfolio Gain = Proceeds(3,000 ) Cost(40% x 5,000 ) = 1,000
