Individual tax optimization
French tax legislation has established various mechanisms allowing individuals to reduce the burden of their taxation.
Personal Tax Optimization: What Is It?
Often mistakenly associated with tax fraud, tax optimization is not illegal. It involves using the current tax rules to reduce the tax burden.
It is by no means synonymous with illegality; on the contrary, no law prohibits a taxpayer from using tax rules to decrease their taxation.
Similar to tax legislation for businesses, individuals have several tools to optimize their taxes.
It is essential to understand that tax optimization is not reserved for taxpayers with very large fortunes. In fact, there are optimization solutions from the first investments.
Examples of Mechanisms Allowing Personal Tax Optimization
- Regarding the Ownership of Shares
One of the first levers of optimization concerns the choice of income tax modalities related to the ownership of securities.
Indeed, since 2018, the rule is the flat-rate withholding tax at a rate of 30%, but it is still possible to opt for the progressive scale and thus benefit from certain deductions. This choice between flat-rate withholding tax and progressive scale can potentially significantly optimize your taxes.
Moreover, concerning the sale of securities and the taxation of capital gains, the French tax system has several mechanisms allowing exemption, deferral, or postponement of taxation. This is notably the case in the event of a retiree’s departure or the implementation of contribution-sale mechanisms.
- Regarding Real Estate Ownership
Taxation is not lenient with holders of real estate assets. However, there are various mechanisms to lighten taxation on rental income.
It is possible to go through ownership via a real estate company (SCI), then the question arises of the choice between submission to income tax or corporate tax.
It is also possible to opt for furnished rental and benefit from the advantageous regime of non-professional furnished lessors if the conditions are met.
- Tools for Tax Reduction
Tax legislation has implemented various mechanisms to encourage real estate investment.
Currently, the best-known is the Pinel scheme, allowing taxpayers to obtain a tax reduction when acquiring real estate and committing to rent it out. The amount of the reduction varies between 12% and 21% depending on the duration of the commitment (between 6 and 12 years).
- Tax Credits and Reductions
In addition to tax reduction tools, it is also possible to benefit from tax credits and reductions to reduce the tax burden.
There are many, including the tax credit for ecological transition granted to taxpayers who carry out energy-saving work.
Furthermore, there is a tax credit for taxpayers employing a household employee. This credit amounts to 50% of the expenses actually incurred.
Although there are many schemes, it should not be forgotten that the amount of tax benefits is limited. Indeed, a taxpayer cannot benefit from a reduction in their tax exceeding 10,000 euros.
Given the multitude of optimization choices, it is recommended to seek the assistance of a tax lawyer to determine which tools are most suitable for your situation. Moreover, these mechanisms are often subject to sometimes complex conditions, and the assistance of a tax lawyer will help secure your choices.
The lawyers at LEXPERTAX are experts in taxation, especially in the optimization of personal taxation. They will assist you in implementing tax reduction tools or estate structuring.