Essential for the calculation of income tax, the family quotient designates the taxable income of a household per tax share. Thus, a couple (2 shares) with €60,000 of taxable income has a family quotient of €30,000. This system allows families to benefit from additional half-shares. Thus, at equivalent incomes, a family with one child pays less tax than a childless couple.
Reminder of the number of shares
For the calculation of income tax, each household is allocated a number of tax shares according to its composition. A single has 1 share, a couple 2 shares. For dependents, the calculation is different. With a dependent, the household earns a half share. With another dependent, he again earns a half share. On the other hand, the third dependent (as well as the following ones) earns 1 additional share.
Concretely, a family with one child therefore has 2.5 tax shares. With 2 children, the home is made up of 3 parts. The number of shares increases to 4 with 3 children, to 5 with 4 children…
Tax calculation
To calculate your income tax, the IRS divides the amount of your taxable income by your number of tax shares. The result thus obtained is then subject to the brackets of the income tax scale, then multiplied by the number of shares in your tax household to obtain the amount of tax due. Thus the application of the family quotient makes it possible to attenuate the progressivity of the income tax.
| Source: 2022 Finance Law | |
| REVENUES 2021 | Rate |
|---|---|
| Up to €10,225 | 0% |
| From €10,225 to €26,070 | 11% |
| From €26,070 to €74,545 | 30% |
| From €74,545 to €160,336 | 41% |
| Over €160,336 | 45% |
Example for a couple with 3 children
With the example of a married couple with 3 dependent children (4 shares) and a taxable income of €100,000 per year, the family quotient is equal to the taxable income divided by the number of shares: 100,000 / 4 = €25,000.
By applying the progressive tax scale, this income is taxed at 0% (1st bracket) up to €10,225 and at 11% (2nd bracket) on €14,775 (25,000 -10,225). Which gives €1,625.25.
Then, to calculate the amount of tax due, given that the couple’s tax household is made up of 4 shares, the previous amount obtained must be multiplied by the number of shares, i.e.: €1,625.25 x 4 = €6,501.
Ceiling of the family quotient
But at this stage comes the ceiling of the family quotient: the gain provided by dependents is limited according to ceilings determined each year. For 2022, it is €1,592 per half-share in the general case. In other words, compared to a household without dependents, the tax savings generated by a half-share cannot exceed €1,592.
For our couple with 3 children (2 shares, i.e. 4 half-shares), the ceiling is set at €6,368 (4 x €1,592). However, if the children were not taken into account, the tax on the income of this couple would be calculated on the basis of 2 parts and its amount would rise to 17,843.9 €. By applying the ceiling of €6,368, the couple’s tax is ultimately reduced to €11,475.9 (17,843.9 – 6,368) and not €6,501.
Specific ceilings
Specific limits apply in certain situations:
- Single parent raising their children alone: €3,756 for the full share granted for the 1st dependent child (single, divorced or separated taxpayers raising one or more children alone).
- Disabled person or person with veteran status: an additional tax reduction of €1,587 is applied when the ceiling of €1,592 is reached for the additional half-share granted. The final benefit is therefore capped at €3,179.
- Widowed person with dependent children: an additional tax reduction of €1,772 is granted when the ceiling is reached for the first 2 additional half-shares (€3,184). The tax benefit is thus capped at €4,956.