Save on the IRS it’s almost a daily act and not just something you only think about when filling out the declaration. Since the IRS filing in 2023 relates to 2023 income (and expenses), it’s never too early to prepare the filing and look for a larger refund.
Until December 31, there are still small things you can do so that, when the time comes to settle accounts with the State, you can pay a little less or receive a little more.
7 ways to save on next year’s IRS
If you make a Retirement Savings Plan (PPR) until the end of the year, you can enjoy tax benefits. That is, you will be able to deduct part of the investment you made from the IRS.
The value of annual deliveries is deductible at 20%, but the maximum amount of the deduction varies depending on age:
- Under 35 years old: you can deduct up to 400 euros if you apply 2000 euros in the PPR;
- Between 35 and 50 years old: 350 euros is the maximum deduction ceiling, if 1750 euros apply;
- From 50 years old: you can deduct up to 300 euros, if you apply 1500 euros.
The tax benefits of these Retirement Savings Plans are also available at the time of redemption. Thus, instead of the 28% withholding tax, you will pay a lower rate, which is calculated according to the years you have held the investment:
- 21.5%, if you keep the investment for up to 5 years
- 17.2% if you serve between 5 and 8 years.
- 8.6% after 8 years
Always ask for an invoice with a tax number
It’s the simplest way to ensure you can deduct your expenses. If you do not ask for an invoice or it does not have a Tax Identification Number (NIF) it will not be included in your E-invoice. Therefore, it will not be able to count towards the deductions that allow you to save with the IRS.
In addition, requesting an invoice or receipt is, according to the law, an obligation of all taxpayers. By the way, maybe you don’t know, but, under the terms of the article 123 of the General Regime of Tax Offensesyou risk a fine of 75 to 2000 euros if you don’t.
Validate / insert / correct invoices in the E-Fatura portal
Invoices issued with your NIF will appear on the E-fatura portal. For this reason, it is important that, from time to time, you go there just to confirm that the invoices have been communicated, that the amounts are correct or that they are in the right category.
Most of them already appear in the correct category. However, and in cases where the trader has more than one CAE (which can happen, for example, with supermarkets), it may be necessary to associate this expense with another sector.
What if there are errors?
If you notice that an invoice is missing in the E-Fatura, you have the option of inserting it. That is why it is advisable that you regularly visit this portal. If you leave everything for the delivery of the statement, you may not have time to check everything or forget to include an important invoice. And these oversights can make you save less on the IRS.
If the trader has mistakenly communicated some element of the invoice, for example, the amount of the expense, it is possible to correct this error on the portal.
If, for example, you notice that an invoice is not in the right sector, you can make that change. Simply access your e-Invoice page, select the option Check Invoices and then Invoice No.?? click in To alter and choose the correct sector in Acquisition Execution Activity· After making the change, click on Save??
Know the right expenses
The truth is that not all expenses can be deducted in the same way. Most invoices end up in the general family expenses category, which has a maximum limit of 250 euros per taxpayer or 500 euros per couple.
But there are expenses that can raise this amount of deductions much more. The following have specific deduction limits. Know what you can deduct and even how much you can save.
Health expenses are 15% deductible up to a maximum limit of 1000 euros per household. What can you deduct?
- Surgical interventions;
- Hospital admissions;
- Orthodontic appliances;
- Glasses (including frames);
- Health insurance, etc.
It is important to bear in mind that in the case of expenses with VAT at 23%, it is necessary to associate the medical prescription with the invoice.
Expenditure on training and education, whether for the taxpayer or the household, can also help you save on the IRS. Can deduct 30% of the amount supported up to a maximum of 800 euros.
Education expenses can include:
- tuition fees
- school books and manuals
- monthly fees for day care centers, kindergartens, milk stations and schools;
- school meals;
Other deductions in education and training
You can also deduct invoices issued by nannies or tutors.
In the case of students moving more than 50 kilometers from their permanent residence, rent expenses are deductible up to a limit of 300 euros per year.
In the case of students studying abroad, invoices for tuition fees or other education and training expenses must be registered manually on the Finance Portal.
Income and interest on loans
Real estate rent and interest on permanent home loans can also help save on the IRS.
In the case of renting, the deduction is 15% with a maximum limit of 502 euros. Those with lower incomes, however, benefit from wider deduction limits.
With regard to interest on loans for own and permanent housing, the deduction only applies to contracts signed up to 31 December 2011. The maximum ceiling is 296 euros.
VAT on invoices
He can deduct up to 15% of VAT incurred on expenses with restaurants, accommodation, beauty and hairdressing salons, maintenance and repair of cars and motorcycles and veterinary expenses, up to 250 euros per household.
So, if you haven’t already done so this year, start asking for invoices with NIF whenever you have one of these expenses, so you can still save on the IRS.
In the declaration to be delivered in 2023, you can also deduct a part of the expenses with gymnasiums and sports teaching. E-fatura already has this category available since September and, if they are in another sector, you can still place them in the right place.
Don’t Forget Other IRS Deductible Expenses
Knowing all possible deductions is critical to saving on the IRS. Don’t forget that, in addition to the most common expenses, there are others that are deductible.
You can deduct charges for nursing homes, home care services and expenses with institutions that support the elderly. The deduction corresponds to 25% of what you spent, with a limit of 403.75 euros. Alimony payments are also deductible.
Notify the household
Communicating the household can also help save on the IRS. This factor is particularly relevant in case of marriage, birth of children or divorce.
For example, if you opt for shared custody under an alternate residence regime, each parent deducts 50% of the expenses related to the child.
If the child is living with only one parent, expenses are deducted in full by that parent. Therefore, if you do not communicate the changes to the household, the deductions will all be for those who share tax residence with the child.
Know the deadlines of the IRS
To save on the IRS, it is equally important to know the deadlines for communicating changes in the household or validating and correcting invoices.
It is also essential not to miss the delivery deadlines for your IRS declaration. This way you avoid unnecessary fines.
Save on the IRS when submitting the statement
And when delivering the IRS declaration, do not forget to do simulations to understand the most advantageous situation. Even being covered by the automatic IRS, it is always possible to simulate to understand which option allows you to save on the IRS.
This simulation can be especially useful in three situations.
Should a couple file only one tax return or can they file two? The answer depends on income, but a right choice can represent a good saving.
In joint taxation the income and expenses of both appear in the same declaration. In the option for separate taxation there is a declaration for each one, with the respective income and expenses.
Before submitting the declaration, you can see the two options on the Finance Portal and see how much you will receive or pay in each case. As you don’t have to keep this option in the following year, just choose the most advantageous one.
dependents who work
If you have dependents under the age of 25, who already work and earn less than the minimum wage, you can choose to include them in your declaration. In this case, you can deduct expenses with the dependent, but adding this income you may have to pay more IRS.
Once again, the best thing is to do the simulation and see if it is more advantageous to include this dependent in the declaration or if he must submit a separate one.
Bundling or autonomous taxation
If you have property or capital income or a positive balance between capital gains and capital losses from financial operations, you will pay a withholding tax of 28% on these incomes.
However, you have the option to opt-in. That is, add these incomes to the rest and, depending on the value, see what rate to apply. If it is less than 28%, it is worth including.
The option for autonomous taxation is presented in the IRS declaration. However, if you realize that the aggregation allows you to save on the IRS, you can choose this form of taxation.
Article originally published in November 2021. Last updated in December 2022.