THE MAIN EXPENSES WHICH ARE DEDUCTIBLE FROM INCOME
All taxpayers may deduct from their taxable income certain expenses incurred during the taxation year. These expenses all into two broad categories: special expenses and extraordinary expenses.
Special expenses are part of private expenses which, in principle, affect the majority of people (insurance, building savings, old-age provision, etc.) and are capped according to the nature of the expense and the number of people in the household. Extraordinary expenses, on the other hand, correspond to expenses incurred when an exceptional and unavoidable event occurs (illness, parents in difficulty, child and childcare expenses, etc.) and are capped according to the amount of taxable income and the composition of the household.
These deductions reduce income tax in different ways depending on each taxpayer's situation.
- Insurance premiums
- Premiums and contributions paid to insurance companies are deductible. This concerns premiums concerning:
- Civil liability insurance;
- Life insurance;
- Death and disability insurance;
- Outstanding balance insurance;
- Mutual or supplementary health care insurance.
The amount of the deduction is capped at €672.00 per dependant in the household. In the case of a single premium for the outstanding balance, the ceiling for deductibility is increased according to age and household composition.
• Pension policy
The pension policy includes various formulas offered by banks and insurance companies which make it possible to finance retirement on a personal basis. The minimum duration of the contract is 10 years and redemption is possible in the form of a life annuity or a lump sum (limited to 50% for the lump sum redemption). The amount of the deduction is limited to €3,200.00.
• Housing savings premiums
Premiums paid to building societies also give rise to a tax deduction. The amount of the deduction is capped at €1344.00 for persons between 18 and 40 years of age and €672.00 for persons over 40 years of age (per dependant in the household). Taxpayers who are up to 40 years of age at the beginning of the tax year may benefit from a deductible ceiling of €1344.00.
• Group insurance supplementary pension scheme
If the employer subscribes to a supplementary pension scheme for employees and the employees pay an additional personal contribution, the latter is deductible from taxable income up to a maximum of €1,200.00 per year.
• Social security contributions
As salaries are declared gross, contributions paid to the Joint Social Security Centre in the context of compulsory affiliation are deductible.
• Interest expenses
Interest charges for personal loans are deductible, regardless of the cause of the loan. The amount of the deduction is capped at €672.00 per dependant in the household.
The interest expense on real estate loans for the acquisition of the principal residence is also deductible, but these are acquisition costs and not special expenses.
Donations made to associations recognised as being in the public interest are deductible, however the sum of the donations cannot be less than € 120.00 nor more than €1,000,000.00 and also cannot exceed 20% of the total net income.
• Deductions related to family status
Alimony granted to the divorced spouse and decided by a judgment is deductible, with a maximum ceiling of €24,000.00.
• Flat-rate minimum for special expenses
The law* states that a deduction of a minimum amount (known as the flat-rate minimum) is automatic for certain special expenses. This minimum is fixed at:
- €480.00 per taxpayer; - €960.00 for spouses who are collectively taxable and who each receive income from an employed occupation.
If the actual special expenses exceed the flat-rate minimum, then the deduction of the actual amount is applied.
Extraordinary expenses are defined as expenses which are unavoidable for material, legal or moral reasons and which considerably reduce the capacity to pay of the taxpayer. These are mainly charges related to:
- An obligation to educate children or support needy parents; - Sickness costs not covered by a fund (invalidity, disability, serious accident); - Funeral expenses; - Expenses resulting from a change of profession; - Sudden and unforeseeable events (flood, fire, theft) not covered by personal insurance.
The deductibility of these expenses is subject to two criteria: the amount of taxable income and the composition of the household.
For dependent children who are no longer part of the household, the taxpayer is entitled to a maximum allowance of €4,020 per child. Childcare or domestic service costs are deductible up to a maximum of € 5,400.00.
*Section 113 of the Income Tax Act