What to declare to pay less tax: tips to reduce your expenses!

" What to declare to pay less tax " is a question that most taxpayers often ask themselves. Indeed, in recent years, paying less tax has become the concern of every tax household. Indeed, tax has an impact on the family budget. It represents a significant part of a household's annual expenses. And by paying less tax, the household can free up financial resources for other needs such as the education of each child, health-related expenses or savings. But then, what to declare to pay less tax?

To pay less tax, you should know that you cannot avoid filing your income tax return. However, to reduce the amount to be paid, you can use the various advantageous tax measures. Whether through deductions, credits or investments, several solutions are possible to reduce the taxable amount. To help you reduce your tax this year, in this article, find out how to declare effectively!

Taking advantage of tax deductions to pay less tax: explanation

Before giving you tips on how to pay less tax, you need to understand the principle of tax deductions to pay less tax.

Tax deduction: what exactly is it?

Tax deduction is a legal mechanism that allows you to reduce your tax by subtracting certain expenses or charges from your taxable income. In concrete terms, this results in a reduction in the amount of tax to be paid.

There are different types of tax deductions. This deduction affects many areas. Real estate is one of them. In a real estate investment for example, the Pinel law allows you to benefit from a tax reduction by investing in new housing located in defined areas. For home improvement work, the State encourages the energy renovation of housing by granting tax credits.

The land deficit is another way to reduce your income tax . Indeed, if the expenses related to a property are higher than the income generated by this property, this deficit can be deducted from the overall income up to a limit of 10,700 euros per year, thus allowing you to pay less tax .

For taxpayers subject to the property wealth tax (IFI) , there are schemes to reduce this tax. For example, donations to public interest organisations or the financing of innovative companies may qualify for a reduction in the IFI.

What impact does the tax deduction have on tax?

The tax deduction allows to reduce the amount of tax that taxpayers will have to pay. By reducing taxable income, it affects the calculation of tax in several ways: 

• The tax deduction applies to the overall gross income, before the application of the progressive income tax scales. Thus, each euro deducted can reduce the tax at all rates of the scale.

• Some tax deductions correspond to specific categorical income (property income, income from non-salaried professions, etc.). They thus make it possible to reduce the tax base for these taxes and, consequently, the amount of tax due.

• The tax deduction can be combined with other tax benefits. Thus, taxpayers will be able to maximize their tax savings.

Our tips for maximizing your tax deductions and paying less tax

To maximize your tax deductions , here are some effective tips.

Plan your expenses by anticipating those that are deductible throughout the year. By investing in energy renovation work or taking out life insurance, you can benefit from tax deductions.

Document all expenses you have incurred by carefully keeping receipts and invoices for all deductible expenses. This documentation will be useful during tax filing to justify your tax deductions.

Take advantage of specific tax measures and benefit from attractive tax advantages. Make sure you meet the eligibility conditions to benefit from these reductions.

Be aware of the ceilings and limits applicable to each type of deduction. Exceeding these limits may cancel out the expected tax benefits.

Adapt your tax strategy according to your situation. Each person has a unique tax situation. Consult a professional to optimize your deductions according to your personal, family and professional situation.

Using a tax credit to pay less tax: how?

In addition to tax deductions, to pay less tax , you can also benefit from the advantages of tax credits.

Tax credits: what are they and how are they different from tax deductions?

A tax credit is another technique that allows taxpayers to directly reduce their income tax. Unlike the tax deduction which reduces taxable income, the tax credit is deducted from the tax calculated according to the progressive scale.

What are the advantages of tax credits over the direct reduction of tax due?

The tax credit is very popular because the tax reduction is immediate. In addition, it is refundable. If the tax credit is higher than the tax due, the excess is refunded by the State to the taxpayer. It also supports specific actions. Indeed, tax credits were initially set up to encourage taxpayers to adopt behaviors that are favorable to the economy, the environment or society. 

The procedure to follow to benefit from tax credits and reduce your tax

Tax credits are not available to everyone. The eligibility conditions and rates of tax credits may vary depending on several criteria. This is why we advise you to seek professional advice before investing in rental property . This way, you could benefit from the most advantageous system.

How to optimize your rental income declaration and pay less tax?

To pay less tax , we advise you to optimize your income tax return. But how do you go about it? Here's how to do it.

Choose the tax regime that suits your situation

Choosing the right tax regime should never be overlooked, as it allows you to optimize your tax return and reduce your tax.

In France, you can choose between two main regimes for income from a rental activity, including the micro-Bic regime and the real regime.

The Micro-Bic scheme is very popular for its ease of management. It allows you to benefit from an automatic flat-rate deduction of 71% on income. On the other hand, in a Micro-Bic scheme, there is a tax on gross income, no deduction of actual expenses and a cap on turnover.

The actual regime, on the other hand, offers a deduction of actual expenses for a taxable net profit. The taxpayer can generate deductible deficits. Unlike a Micro-Bic regime, the actual regime is more complicated to manage. It is also subject to additional reporting obligations.

To choose between the micro-BIC regime and the real regime, you must take into account several factors including:

• The amount of your rental income: if you have low rental income, the micro-BIC scheme is more advantageous. On the other hand, the real becomes more interesting, because your deductible expenses are higher.

• The nature of the charges: the actual system allows several types of charges to be deducted. The micro-BIC system is limited to a flat-rate deduction.

• Your personal situation: if you have property deficits to carry forward, the actual system is more advantageous. 

Optimize the income from your financial investments

Maximizing the income generated by your financial investments is not something to be taken lightly. To do this, you need to adopt the best strategy. But what is this strategy?

Define your investment goals

To optimize the income from your financial investments, think about your investment objectives by determining whether you are investing for the short term (less than 3 years), the medium term (3 to 10 years) or the long term (more than 10 years). You must also assess your risk tolerance and choose investments that are appropriate. Finally, define whether you are looking for regular income or potential capital gains.

Diversify your portfolio

We recommend that you spread your investments across different asset types (stocks, bonds, mutual funds, etc.) and geographic areas. This way, you minimize risks. Also, do not concentrate your investments on a single sector or asset class.

Select the best investments

To choose the best investments, analyze the characteristics and risks of each investment. Choose quality investments that match your risk profile and investment objectives. Find out about the fees associated with the different investments.

Managing your investment portfolio

Monitor your investments regularly. Adjust your portfolio based on market changes and your goals. Rebalance periodically to maintain your desired asset allocation. Seize investment opportunities while managing risks.

Optimize taxation

Take advantage of advantageous tax measures such as PEAs or PERs to reduce your taxes on your investment income. Correctly declare your investment income to the tax authorities. Consult a tax specialist for personalized advice on the taxation of financial investments.

Invest from time to time

Set up regular payments, even small amounts, to benefit from the effect of compound interest over the long term. Also, consider an automatic investment program to simplify the management of your investments.

Ask for help from a professional or expert in the field of taxation

 For personalized advice tailored to your situation, contact a professional. A professional can help you develop a coherent investment strategy that is in line with your goals.

Tax planning strategies you need to know

To pay less tax , here are some tax planning strategies you should know. 

Anticipating changes in personal circumstances

Life is full of unexpected events. Several events can impact your tax situation. You must anticipate them to optimize your taxes . Among these events, the most frequent are marriage, the birth of a baby, moving and retirement.

The choice of matrimonial regime can influence your taxation. Find out about the different regimes and their tax implications before getting married. Tax benefits related to childcare and schooling exist. Declare the birth of your child to the tax authorities to benefit from them. A change of address can change your local taxation such as housing tax or property tax. Inform the tax authorities of your new address. Retirement leads to a change in your tax regime and your sources of income. Anticipate these changes for optimal management of your taxes.

Using tax loopholes wisely

The French tax system offers many tax breaks. Taxpayers can take advantage of various tax measures to reduce their income tax or local taxes. Here are the different tax breaks for each type of investment.

• rental investments: the Pinel system, the Normandy system, the Loc'Avantage system offer tax reductions for investment in certain types of housing.

• Saving for retirement: PER (Retirement Savings Plan) and Retirement Savings Contributions (CER) allow you to deduct your contributions and benefit from advantageous taxation when you retire.

• Donations to associations: donations to charitable organizations are eligible for a tax reduction of 66% of the amount paid.

• Home improvement work: tax credits and financial assistance are available for energy saving work, energy transition or adaptation of housing to disability.

Tips for long-term planning

To help you plan your taxes over the long term, here are some tips:

• Define your tax goals: determine the amount of tax you want to reduce or the most advantageous tax system for your situation.

• Consult a professional: A tax professional or financial advisor can help you develop a personalized tax strategy tailored to your goals.

• Stay informed about legislative developments: the French tax system evolves regularly. Follow the tax news to stay informed of changes. By following the news, you can easily find new opportunities.

• Organize your documents: keep your tax receipts to facilitate your procedures. These documents can be useful to justify possible deductions.

How to reduce withholding taxes?

Withholding tax has changed the way taxes are collected in France. It is now possible to adjust your withholding tax rate based on your income and deductible expenses.

The withholding tax rate is calculated based on your taxable income. However, it is possible to change it in the event of a change in circumstances, such as a drop in income or an increase in expenses. This allows you to pay less tax throughout the year, rather than waiting for regularization at the end of the year.

It is also possible to benefit from certain exemptions or reductions by adjusting the withholding tax rate. For example, people with exceptional income can request a downward modulation of the rate to avoid excessive taxation.

What to declare to pay less tax: what you need to remember

Are you one of those who wonder what to declare to pay less tax ? Know that optimizing your income tax return to pay less tax is within the reach of every tax household in France. By taking advantage of tax deductions, tax credits and choosing the right tax regimes and investments, it is possible to significantly reduce your tax. Systems such as the Pinel law, energy renovation work or PER investments offer valuable opportunities to reduce your tax burden. By properly documenting your expenses, anticipating personal changes and consulting professionals, you can maximize tax benefits and thus free up resources for other essential needs.