The government has just presented its draft budget for 2024. The opportunity to examine the tax loopholes which cost the State the most. Here are the new top 5 benefits reserved for households.
Exemptions, allowances, deductions, credits and other income tax reductions: among the many tax loopholes, which is the most costly for the state? The answer can be found in the annexes to the 2024 finance law which has just been presented by the government.
here is the top 5 tax loopholes, income tax categoryand which benefit a very large part of the population.
| Most expensive tax expenditures | Cost 2024 * | |
|---|---|---|
| 1 | Home employment tax credit | 6.17 billion |
| 2 | 10% reduction on retirement pensions | 4.54 billion |
| 3 | Employee savings exemption | 2.58 billion |
| 4 | Exemption from family allowances and AAH | 1.85 billion |
| 5 | Exemption from overtime | 1.78 billion |
| 6 | Tax reduction for charitable donations | 1.77 billion |
| 7 | Deduction of repair and improvement expenses | 1.65 billion |
Source: volume II of the ways and means annex to the finance law for 2024
* Estimate made by Bercy: Figures for 2024
N1 Tax credit for employing a home-based employee
4.5 million tax households declare expenses for personal services in their home, whether directly via systems such as Cesu or via a company or association providing a service. This is a tax credit. Therefore, unlike the second niche of this classification, it entails an expense for the state for each of the beneficiaries, even the non-taxable ones.
Cleaning, gardening… Is it better to employ a direct employee or go through a service provider?
N2 10% reduction on pensions
The nearly 15 million beneficiaries of this tax loophole, the second most expensive when focusing on income tax, are both withdrawals and taxpayers receiving alimony. Estimated cost of this tax expenditure intended to help withdrawals: 4.54 billion euros in 2024.
First important clarification: this is not a tax credit. The 3 million most modest beneficiaries of this niche are non-taxable: the expenditure for the Public Treasury is zero in their case. Second clarification: this tax advantage is capped for each tax household (4123 euros in 2023).
The flat rate reduction of 10% for professional expenses which benefits all workers, including employees, is not considered by Bercy as a tax expenditure, rather as a simplification measure to avoid each taxpayer having to declare their real expenses. The application of the family quotient is also not considered as a tax expenditure from Bercy’s point of view.
N3 Exemption from employee savings
When your employer pays you a participation or incentive bonus, you have the choice between 1. taking the cash, which adds this bonus to your income subject to income tax, or 2. placing the bonus on a health plan. ’employee savings (PEE, PER, Perco…), which exempts you from taxes. This exemption (1) contributes more than 2 billion euros each year to public finances. However, it is impossible to precisely determine the number of beneficiaries of this niche.
Incentive and participation: should you take the cash or save?
N4 Exemption from family allowances
Here is the title for this 4th niche: Exemption from family benefits and the allowance for disabled adults. This lack of revenue for the tax authorities is slightly less than 2 billion euros. The government does not detail the number of beneficiaries.
N5 Exemption from overtime
This is a measure taken by Emmanuel Macron’s government in the wake of the Yellow Vest movement: the return of tax-free overtime. Since January 2019, overtime has been exempt from income tax, however limited to 7,500 euros of overtime in the year. The cost to the state was limited to 1 billion euros in 2019 but has now reached almost 2 billion euros.
And also…
N6 – Tax reduction for donations to charities. Nearly 5 million taxpayers declare donations each year to charitable associations or other organizations of general interest and aid to the most deprived. The result: a tax reduction of 66% or 75% of the amount given. Annual cost for public finances: 1.8 billion euros.
Important clarification: non-taxable households who donate do not benefit from any tax benefit, since it is a reduction and not a tax credit. According to the annual Research & Solidarities study, around a quarter of donors are non-taxable and therefore appear to be disinterested donors.
What tax reduction for your donations to associations?
(1) More precisely, the exemption of sums paid for participation, profit-sharing, matching contributions or capital gains sharing, in employee savings plans and retirement savings plans. collective or compulsory enterprise.