What is an abatement? 

What is an abatement? .An allowance is a reduction in the tax base, that is to say a flat percentage subtracted from income which is normally taken into account in the calculation of tax. Thanks to this legal device, the taxpayer is not taxed on all of his taxable income . The list of abatements changes with the adoption of each new budget law.

Examples of abatements

There are percentage abatements: 40% reduction on dividends,  10% reduction for professional expenses … The latter is applied automatically by the tax authorities. It is calculated on the amount of taxable income received by a taxpayer for a fiscal year (salaries, wages, retirement pensions received). There are also standard abatements: abatements for inheritance or donations  (parent / child abatement at 100,000 euros, abatement between spouses or civil partners at 80,724 euros), abatement for journalists’ expenses (7650 euros) …

Difference between abatement, tax reduction and tax credit

The tax reduction does not concern taxable income but the amount of the tax itself. It is directly deducted from tax. However, it cannot give rise to a refund. For example, if a household must pay 1,000 euros in tax and benefit from a reduction of 1,500 euros, it will not pay tax but will not receive the difference of 500 euros either. Tax reductions can take place for example following shares taken in an SME, donations, accommodation costs of a dependent person, hiring an employee at home …  The tax creditworks like tax reduction except that it can lead to a refund. Example of tax credit: childcare expenses, interest on loans taken out by students, expenses for equipping the main dwelling for personal assistance, etc.

 

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