How to calculate and optimize your income tax? 

Understanding income tax

All individuals over the age of majority in France are required to pay income tax every year, provided they meet the relevant conditions. The amount of tax deducted depends on the taxpayer's household size and income bracket. The higher the taxable income, the higher the amount to be deducted. Low-income households are therefore subject to a low tax rate. In some cases, they may pay no tax at all on their profits.

Income tax helps to optimize government finances, ensuring that spending on social welfare, defense, education and infrastructure is taken care of as normal. Self-employed workers, self-employed professionals, pensioners and any taxpayer domiciled for tax purposes in France are potentially liable for income tax.

Individuals whose tax home is in another country, but who 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, these inflows are taxable. The same applies to commercial and industrial profits, indemnities, commercial agricultural income, non-trading profits, bonuses, etc. All this income is taken into account when calculating income tax. All this income is taken into account when calculating income tax.

Income tax is a progressive tax, meaning that the tax rate increases as income rises. This ensures that the richest people contribute more to public finances than the least wealthy.

Solutions for optimizing your income tax

Numerous tax exemption schemes offer the possibility of paying less tax on your income. You can optimize your tax situation without investing to take advantage. To do so, make sure you declare your tax deductions and credits. Each deduction or credit is applied to your tax to reduce it. Declaring them all can significantly reduce your tax base and save you money.

Correctly declare your family situation to the tax authorities. If you have dependent children, be sure to indicate this. This will help you improve your family quotient. If you look after children who are studying, you can benefit from a substantial tax reduction based on their level of study. Don't forget to include any alimony or child support payments in your tax return.

You can also optimize your income tax by investing. You can invest your income in a société civile de placement immobilier (SCPI). This allows you to benefit from the tax advantages offered by tax exemption schemes such as Pinel, Denormandie or Malraux.

You can make financial investments in local investment funds (FCPI) or in a film and audiovisual financing company (SOFICA). These investments entitle you to a reduction or exemption from income tax.

The other way to optimize your tax situation is to invest in real estate. The government has set up a number of tax exemption schemes to encourage investment in this sector. Call in a real estate agent to evaluate the most advantageous options. You can choose between old property (Malraux), heritage property (Monuments historiques) or rental property (Pinel, LMNP, Denormandie, etc.).