Well, has everyone submitted their tax return yet? How many taxes are due this year? If you can’t look at this amount without tears, then this article is for you. In it I will tell you how to reduce income tax by making contributions to an additional pension.
Considering the latest news about pension reform, you can’t count on a good pension from the state. If you believe the statistics, in 2000 there were 2 workers per 1 pensioner, and by 2070 there will be only 1.3. The solidarity pension is paid from the contributions of those who are currently working.
This is due to the increasing aging of the population. People began to live longer and give birth less. It is not for nothing that the issue of pension reform is so pressing.
Data source on page 17 recommendations by Jean-Paul Delevoye - High Commissioner for Pension Reform, on the French government website.
How to be?
There is an excellent solution - saving for retirement on your own and at the same time reducing income taxes.
With one shot you will kill two birds with one stone.
I suggest you take care of your pension yourself and not rely on the state. Moreover, thanks to Loi PACTE, you have a great opportunity to increase your future pension and at the same time reduce taxes. You can read more about existing pension contracts on the website lerevenu.com.
In this article I will tell you how to reduce the tax on your pension contributions as much as possible, since not all contributions reduce your tax base. For this purpose, there is enveloppe fiscal, which is calculated differently, depending on the chosen tax disposition. And the choice of tax disposition will depend on your professional status.
How to reduce taxes for employees by contributing to pensions
Let's start with hired employees, since for them, unlike entrepreneurs, only one solution is suitable - this is a tax disposition within the framework of loi Fillon. I advise entrepreneurs not to scroll through, as you can also use this solution to increase your pension and reduce taxes.
So, pension contributions under Loi Fillon relate to Charges déductiles. These are expenses that can be deducted from RBG (revenue brutal global). More details about what expenses are Charges déductibles and how to deduct them from RBG you can find in the previous article.
Calculation formula enveloppe fiscal Fillon
Disponible Fillon RETRAITE = 10 % x RAP * N-1
Plancher : 10 % x 1 PASS de l'année N-1
Plafond : 10 % du RAP* limités à 8 PASS (N –1)
RAP – income from professional activities minus 10% (frais pro)
PASS de l'année N-1 – annual social protection ceiling for the previous year, €41,136 in 2020.
The lower threshold for deductible contributions in 2021 will be €4,113. And the upper ceiling is 32908€. These thresholds are reviewed annually based on the size of the PASS.
This tax dispositive also allows you to include the spouse's unused enveloppe fiscal.
Let's look at an example
Misha Ivanov works for hire, salary 60 K€/year. He is married to Sveta, she does not work. TMI (tranche marginal d'imposition) – 30%.
We calculate the amount of contributions that can be deducted from income:
Enveloppe fiscal Mikhail:
10% x (60,000 x 0.9) = 5,400 €
Enveloppe fiscal Lights:
10 % x 1 PASS de l'année N-1 = 4113
Total Enveloppe fiscal = 5400 + 4113 = 9,513€
Mikhail can reduce the tax base by the amount of pension contributions of 9,513 € in 2021 and the tax itself by 2,853 €, which will be 30% from his contributions.
Additional enveloppe fiscal
In addition, you have the right to an additional amount of contributions that can be written off from the tax base. The additional enveloppe can include the unused enveloppe fiscal for the previous 3 years.
If you are interested in a pension contract, sign up for a consultation with me, I will calculate everything for you.
Sign up for a consultationHow to reduce tax for TNS entrepreneurs and majority managers through pension contributions
In this part, let's look at the tax dispositive that can only be used by entrepreneurs (hereinafter referred to as TNS) and Gérants majoritaires art. 62 of the Tax Code (hereinafter, CGI).
This is the law of loi Madelin art. 154 CGI, thanks to which TNS can deduct their contributions to the supplementary pension from the tax base. Thus, it can be legally reduced.
Formula for calculating envelope fiscal Madelin:
Disponible Madeline RETRAITE
(10 % x BIC/BNC) + 15 % (BIC/BNC -1 PASS)
Plancher : 10 % x 1 PASS de l'année N
Plafond: (10 % x Bénéfice plafonné à 8 PASS) + 15 % (Bénéfice plafonné –1 PASS)
BIC – income from commercial activities
BNC - income from non-commercial activities
PASS – annual social protection ceiling, €41,136 in 2021.
The lower threshold for deductible contributions in 2021 will be €41,136. And the upper ceiling is 76100€.
And now let's look at all this with an example
Our hero Misha Ivanov got divorced and opened his own architectural bureau.
Mikhail's income BNC: 45 K€. TMI – 30%.
We calculate the envelope fiscal, which can be deducted from income
10% BNC + 15% (BNC–1 PASS)
10% x 45000 + 15% (45000–41136) = 4500 + 579.6 = 5079.6€
In 2021, Mikhail can reduce the tax base for income tax by the amount of contributions in the amount of 5079 €.
And thanks to these contributions, Misha will reduce tax by 1523€, which will be 30% from his contributions and will receive a refund into your bank account next year!
Pension contract FAR PER
Well, in the end, just a few words about a solution that will allow you to save on taxes and save for a comfortable old age. This contract is called FAR PER, I’ll tell you more about it in the following posts, but for now you can read on the website our partner.
Financial results by funds, included in the FAR PER pension contract. As well as honorary awards from independent financial media:
- Label Sélection Premium "PER individual" from Good Value for Money
- Oscar 2021 du meilleur contrat PER individuel proposé par une association by Gestion de Fortune
- Top d'Or 2021 du meilleur contrat PER individuel proposé par une association by Le Revenu
- Top d'Or PER 2021 - Catégorie "Grand prix du Jury" by Tout Sur Mes Finances
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