With certain expenses and tricks, you can make sure that your tax return gets lower in the last two months of the year. We provide four tips that you can do something with this year.
If you have the luxury of having money left over at the end of this year, you can make smart choices with which you can lower your tax return, and next spring you will have to pay less or maybe even get a refund.
“But do nothing because of the tax advantage,” says Peter Pleijsant, wealth planning expert at ABN AMRO MeesPierson. “Make your own choices that suit your situation. You also need to be able to save money, otherwise it gives hassle afterwards.”
1. An expensive purchase
A classic car or a beautiful piece of jewelry? Or do you still want to do maintenance on your house? It can be an advantage to spend money on this year. What’s up with that? The tax authorities look at the amount you have in savings and investments and collect tax from them. The more power, the higher the load. House maintenance is also an option.
Are your savings and investment assets higher than EUR 50,650 (for tax partners EUR 101,300)? Then you pay at least 0.56 percent in taxes. Do you own more than 1 million euros in savings and investment money? Then you pay 1.71 percent tax on the amount well over a million. Up to around 1 million, that is often 1.35 per cent.
2. Donate to (children) children
Each year you can donate a certain amount tax free. In 2021, that amount will be 1,000 euros higher than usual due to the corona crisis. You can give 6,604 euros tax-free for children and 3,244 euros for grandchildren.
“In the future, this scheme is likely to go out, which is something to consider if you might want to donate.”
Peter Pleijsant, wealth planning expert
The ‘increased one-off exemption’ will also be higher than normal in 2021: more than 26,000 euros for children between 18 and 40 years of age. In the case of an expensive studio, you can even ‘gift’ 55,996 euros. And if the amount is used for the purchase of housing, the exemption is more than 105,000 euros. In the new coalition agreement, it was announced that this exemption for the purchase of a house, also known as the ‘cheering tone’, will be abolished. Pleasant. “It’s something you have to consider if you might want to donate.”
For people who doubt whether their pension is adequate, it can be helpful to set aside extra money in the form of an annuity, Pleijsant says. “You have to see it as an extra supplement to the pension.” The premium you pay is often deductible up to a certain maximum in the income you have, which makes a difference in the tax return. This can also be interesting for people with their own business who are in charge of their pension.
4. Pay and transfer a mortgage
If your finances allow it, it may be smart to make extra repayments on your mortgage. This is money that would otherwise be included in box 3 as assets. By making extra installments with this, the income tax you have to pay decreases. But, says Pleijsant, it takes time. “Do not wait too long. The sooner, the better.”
Moreover, it is not wise for everyone. “For example, if you have a bank savings loan, it is usually not favorable.” In other words: When in doubt, get good advice. Most mortgage lenders allow you to repay a maximum of 10 percent of the original loan per year without penalty.
Closing is also an option. Mortgage rates are rising again, but are still low. Catching now for a longer period of time can therefore be beneficial. The ‘fine interest’ that you may have to pay can be deducted for tax purposes up to a maximum of 43 percent just like other refinancing costs. Next year, it will be a maximum of 40 per cent.
This article was adapted for current events on December 17, 2021.