Question to an expert.
What is the difference between tax reduction or tax deduction?
There are two levers to lower your income tax: make investments that will generate a tax reduction – FCPI (Mutual Fund for Innovation), Sofica (companies for the financing of the film and audiovisual industry), subscription to the capital of SMEs, Pinel real estate investments, etc. – which will subtract from the amount of tax due, or make investments which will be deducted from your income (retirement savings, rental property works, acquisition of historical monuments, etc.).
If your main motivation is to save tax at time T, you can favor either investments with a high reduction rate such as Sofica (48% of the amount invested), or investments deductible from your income such as retirement savings plan (PER); in the latter case, the higher your marginal tax bracket (MTR), the more tax savings will be.
On the other hand, if your objective is to build up your assets while taking advantage of tax advantages and the leverage effect of credit, you can favor the acquisition of real estate, directly or in a real estate investment partnership. For example, the Pinel system will provide you with recurring tax reductions for a minimum of six or nine years and that of “historic monuments” will allow you to deduct significant amounts of work from your overall income (subject to commitments rental).
The choice of one or more of these devices is generally motivated by the amount of tax savings sought, without forgetting to take into account the cap on tax loopholes; but it must also be motivated by your short, medium and long term financial objectives.
Our file on the income tax return