Taxpayers age 65 and older have their own advantages to reduce their tax bill. Before the end of the year there is some room for maneuver so that in the next tax return, or depending on what operations, they pay less and save money in their pockets.
Beyond the advice that taxpayers in general can benefit from, such as contributing up to the maximum limit to the pension plan or donations to NGOs, among those over 65 there are several chapters that only benefit this group. For example, when rescuing the pension plan, when selling a home or when transferring the family business.
More than the contribution to pension plans, at these ages their rescue is already of interest. The way it is done can make a difference, so it’s time to do the math.
The benefits of the pension plan are taxed as income from work, but when you redeem it in the form of capital – all or part of it at once, without deferring it in periodic income – “you opt for a 40% reduction on contributions prior to 2007”, recalls Raquel Jurado, technician of the studies service of the Registry of Tax Advisory Economists of the General Council of Economists (REAF-CGE). It is something that does not happen if it is rescued in the form of income.
It must be taken into account that the deduction can be applied in the year in which one retires or in the following two, so you do not necessarily have to be 65 years old. Following this limit, those who retired in 2021 have until December 31 to decide to redeem all or part of their plan and benefit from the 40% reduction.
Jurado recommends that when you stop working, whenever possible, you wait until the following year to redeem the pension plan. “Do not do it all in the same year. If you do it this way, you combine salary, accumulated salary and the redemption, you will be taxed at a higher marginal rate. The tax pressure will be lower if you wait and the tax bill is minimized” .
In this sense, Héctor Jiménez, tax expert of the TaxDown platform, recommends that in the case of pension plans of considerable amounts, rescuing them in the form of income should be considered so that the taxation is more sustained over time and similar to what was borne during the working season. For example, rescuing 300,000 euros at once would lead to increasing the tax rate to the maximum, so it could be worth rescuing 20,000 a year.
The last criterion of the Central Economic Administrative Court is that if you have more than one pension plan, you can redeem them in different years and also opt for the 40% reduction.
If you have a couple or three, a good way to redeem them is one a year, as long as you respect the deadline to do so within the year of retirement and the following two, which mark the time limit to benefit from the reduction. “That must be respected no matter what, you have 3 years to rescue them and access the reduction,” says Jurado.
If you are over 65 years of age and sell your primary home to obtain liquidity, it is the best option because it is exempt from paying capital gains.
If you do not reach the age of 65 and are thinking about selling the home, the advice is to wait until that age and carry out the operation to save the tax impact, as long as it is not an urgent need.
If the home also belongs to the spouse, and only one is 65 years old, 50% of the owner who has not reached that age will be taxed. Thus, you can wait until both spouses reach 65, because then the entire home is exempt and not just half. “If the municipal capital gains tax is paid, it is not forgiven,” Jurado warns.
Another point to keep in mind is that the sale must be reported in the income tax return, since the operation can be verified by the Tax Agency “but no gain must be included,” highlights Jiménez. “The exemptions are tax benefits, but they are not exempt from being verified by the AEAT. So that they know that there has been a variation in your assets and if this verification is necessary, you have to report,” he continues.
In general terms, the exemption for the sale of the habitual residence can be applied by any taxpayer if they sell and reinvest the amount in buying another home within a certain period, an obligation and period that does not exist for those over 65.
The sale of assets is exempt if you are over 65 years old and reinvested in a life annuity, up to 240,000 euros and within a maximum period of six months. If you have not yet turned 65 and an operation is finalized, it may be worth delaying it until that age to reduce the tax bill.
These transferred assets include categories as different as second homes, a boat, shares or cryptocurrencies, Jurado reviews. “Any element whose transmission generates a capital gain,” he points out.
Upon reaching the age of 65, the transfer of the family business to descendants or spouses is exempt from payment of capital gains, if certain conditions are met. One of them, that the donor exercised management functions and left the position and his remuneration with the operation, or that he had a participation of between 5% or 20% depending on whether the declaration was individual or joint, the Council details. General of Economists.
If conditions are met, a reduction in the net wealth tax base of 95% of the acquisition value is also applied in general.
There are another series of tax advantages that anyone can apply, regardless of age. In any case, they are worth it for those over 65 who can take advantage of them.
One is for having a rental home, which gives access to reductions of 60% on the net income in general, so only the remaining 40% is taxed. To access it, the rented home must be the tenant’s habitual residence, that is, second homes that are rented occasionally are not included, if services specific to the hotel industry are provided or if it is rented to a company without the employee being designated. that is going to occupy it.
As an example, if a rent of 600 euros is charged for an apartment, in the year it will be 7,200 euros. If the expenses for the year are 200 euros, there is a net return of 7,000 euros (income minus expenses). By applying the 60% reduction, taxes of 2,800 euros would be paid.
As of January 1, 2024, the lessor’s reduction will fall from the aforementioned 60% to 50% for contracts signed as of that date, the REAF-CGE warns. “The contracts that are already in force will maintain 60% in a transitional regime, so if you are considering renting a home, try to sign now,” they explain. The idea is to formalize the contract before December 31.
Starting next year, in any case the reductions may be greater (up to 90%) if renting in stressed areas and the monthly payment is also reduced, by 70% if a home that is rented to young people is on the market in a stressed area or 60% due to rehabilitation works. The problem is that right now there is no officially declared stressed area.
Deductions for energy reforms are other advantages that apply to all taxpayers. Such as changing windows or installing solar panels, which give access to discounts of 20% to 60% of the amounts paid, with limits that vary between 5,000 and 7,500 euros. There are three major programs, but “two end in 2023; if you are thinking, for example, of changing the windows, now is the time,” says Jurado.
It must be taken into account that to benefit you must have an energy certificate before the start of the reforms and another upon completion, always before December 31, to compare the jump in efficiency. If the work has not started, the margin is already very tight.
You can take advantage of the tax advantage for works in homes that are rented to third parties, as long as it is the tenant’s habitual residence.
Before the end of the year, it is also worth reviewing regional deductions, such as those for paying rent, disability, widowhood, care or for the simple fact of being over a certain age. “Among those over 65 we see misinformation about certain tax or regional benefits. Today, because you are older, you already have deductions,” explains Jiménez.
The deduction guide for the next campaign has not yet been released, but you can consult those for the last year as a reference, since several years have been applied. In the Canary Islands, those over 65 years of age receive a deduction of 144 euros; In Aragón, those over 70 have a deduction of 75 euros; and in Castilla-La Mancha it reaches 150 euros for people over 75.
When filing the income tax return, it is necessary to check that it is included because “the Tax Agency does not apply it automatically.”