Few French people use it but it is possible to reduce a bill which will arrive in 2024. There are only a few days left to take advantage of it.
This is the constant puzzle: how to lower your bills so as not to see your budget explode? The question will continue to arise in 2024 with the new announced increase in prices, mainly for energy. Among the solutions, there is one that too few French people resort to: reducing the amount of their taxes. Does this seem too complex to you? Don’t panic: there are two ways to do this easily and quickly.
The first is to make a donation to an association of general interest or to an organization helping people in difficulty. In the first case, 66% of your donation can be deducted from your income tax. This rises to 75% in the second. In 2021 (latest up-to-date figures), only 4.8 million French people made a donation to an association to reduce their tax, or 36% of taxed households.
But be careful, this will not save you money, just lower the amount paid to the taxman. A concrete example with a person who must pay €1000 in taxes: if they do not make a donation, they pay their €1000; if she makes a donation of €200, she will be able to deduct €132 from the €1000 due in taxes. However, the addition between the amount paid for taxes and the donation results in a total expenditure of €1,068, more than if she had not made a donation.
Another possibility, just as easy and quick, exists. This involves making a payment into your retirement savings plan (PER). More than 7 million French people have one (i.e. 18% of taxpayers). The system is, however, different from that of donation.
Here, it is a question of reducing the total income received during the year (salaries, etc.) and declared to the tax authorities. This is what serves as the basis for calculating income tax. The amount deducted from this taxable income corresponds to a percentage of the amount paid into the PER. This percentage is very easy to find: it’s your marginal tax rate. A barbaric term which is written on the last page of your tax notice. Four are possible: 11%, 30%, 41% or 45%.
Example with a person who declares €30,000 in annual income. If she pays €3,000 into her PER and her marginal tax rate is 30%, she will deduct €1,000 from her income. The amount of his income tax will therefore only be calculated on €29,000. This will therefore lead to a reduction in the final cost of taxes.
If the solution seems more advantageous than donating to associations, it is a short-term vision. Indeed, when you want to withdraw the money from the PER, significant taxation applies. So it’s up to you to decide: pay the money to the State or to the associations? You have until December 31, 2023 (inclusive) to decide. Otherwise, this will only be taken into account in 2025.
