How to calculate and optimize your income tax? 

Understanding income tax

All adults in France have to pay income tax every year if they meet certain conditions. This deduction changes depending on your tax household and a progressive tax bracket system. The higher your taxable income, the more you'll pay. Households that earn less are subject to a low tax rate. In some cases, they might not have to pay any tax on their profits.

Income tax helps the government manage its finances, so it can cover expenses for social programs, defense, education, and infrastructure. It also boosts funding for specific sectors, research, and public administration services. Freelancers, liberal professions, retirees, and any taxpayer who is a tax resident in France are potentially liable for income tax.

Individuals who have their tax residence in another country but have sources of income in France are also concerned. Income tax is not limited to salaries. All household resources are taxable.

If you receive retirement pensions, unemployment benefits, or property income, this money is taxable. The same applies to commercial and industrial profits, compensation, agricultural business income, non-commercial profits, bonuses, etc. All of these incomes are taken into account when calculating income tax.

Income tax is a progressive tax, meaning the tax rate increases as income increases. This helps ensure that wealthier individuals contribute more to public finances than less wealthy individuals.

Solutions to optimize your income taxes

Many tax relief schemes offer the possibility to pay less tax on your income. You can optimize your taxation without investing to benefit. To do this, make sure you declare your deductions and tax credits. Each deduction or credit applies to your tax to reduce it. Declaring them all can significantly reduce your tax base and save you money.

Declare your family situation correctly to the tax authorities. If you have dependent children, be sure to indicate this. This helps you improve your family quotient. If you care for children who are studying, you can benefit from a significant tax reduction depending on their level of education. Don't forget to mention any alimony paid in your return.

You can also optimize your income tax by investing. You can invest your income in a real estate investment company (SCPI). This offers you the possibility of benefiting from the tax advantages linked to tax exemption schemes such as Pinel, Denormandie or Malraux.

You can make financial investments in local investment funds (FCPI) or in a company for the financing of cinema and audiovisual (SOFICA). These investments allow you to benefit from a reduction or exemption from income tax.

Another way to optimize your tax situation is to invest in real estate. The government has implemented several tax relief schemes to encourage investment in this sector. Contact a real estate agent to assess the options with the most advantages. You can choose older properties (Malraux), heritage properties (Historical Monuments), or rental properties (Pinel, LMNP, Denormandie, etc.).