Take action to reduce your personal income tax liability in 2021

Before the end of this year, check whether you can take any action that will enable you to reduce your personal income tax liability for 2021 (in which you file between April and June 2022).

Here are a few examples…

  1. Pension Plans:

First of all, remember the possibility of making contributions to your pension plan before the end of the year. In this way, you will reduce your personal income tax base by the amounts contributed and obtain savings of up to 47% of these amounts (or even more, depending on the Community in which you live.)

  • In 2021 the maximum contribution to a personal pension plan is 2.000 Euros.
  • For contributions to company plans this limit is increased by a further 8.000 Euros. This means that between your 2.000 Euros contributed to personal plans plus the 8.000 Euros you can contribute via Company plans you are entitled to a total of 10.000 Euros of contributions.
  • You can also contribute up to an additional 1.000 Euros to your spouse’s plan if your spouse does not earn income from work and business activities or earns less than 8.000 Euros per year.
  1. Main Residence:
  • If you purchased your main home before 2013 and enjoy the deduction of the mortgage loan payments such as capital and interest, you can deduct a total amount of 9.040 Euros per year. ┬áIf you do not reach the limit of 9.040 Euros (the maximum amount that you can deduct per year), an option is to make an early mortgage repayment before the end of the year until you reach that figure. In this way, you will maximize your deduction and you will be able to save up to 15% of the total amount paid.
  • Important: when calculating the amounts that give you the right to the deduction for the purchase of a home, do not forget to include the annual premiums paid for the damage and the life insurance the bank has made you purchase in order to grant you the mortgage.