(Article sponsored by PER.fr) Do you want to reduce the amount of your income tax in 2024? Payments into a PER can be deducted from your taxable income. Explanations.
In recent years, major changes have taken place in retirement savings products with the aim of encouraging the French to put money aside for their old age.
Available since October 2019, the PER, or Retirement Savings Plan, succeeds the multiple retirement savings contracts such as the PERP, Madelin (dedicated to the self-employed), or other article 8.
The PER has several advantages, such as the possibility of choosing between a capital outflow or a life annuity. But what is the main interest of the PER is its tax advantage.
The new PER: a major tax advantage!
THE new PERor Retirement Savings Plan, created within the framework of the Pacte law, allows payments to be deducted from taxable income: it is therefore a tax deduction.
You can therefore make savings thanks to your PER, by reducing your income tax. The tax savings you make are proportional to your marginal tax bracket. And to encourage the French to prepare for retirement, the principle is simple: the more you save, the greater the tax savings!
Another particularity of the PER is that the tax reduction is not subject to the overall cap on tax loopholes of 10,000 euros per year, as is the case for a Pinel or Denormandie real estate investment or even for the investment in SMEs, innovation mutual funds (FCPI) or local investment funds (FIP). On the other hand, ceilings exist regarding your payments into a PER.
What is the tax exemption ceiling for payments on the PER?
PER payments are capped, with a variable ceiling depending on your professional situation. However, it is possible for you to increase this ceiling, whether you are an employee or TNS (self-employed worker), by pooling the ceilings between spouses or even recovering the ceilings from previous years.
If you are an employee, the ceiling for payments giving rise to the tax advantage is: 10% of income for year N-1, with a maximum deduction of 35,194 euros for 2023; or 4114 euros if this amount is greater than the previous one.
For self-employed workers (TNS), the ceiling corresponds to the higher of these two amounts:
- maximum 10% of taxable profits up to 351936 euros + 15% of taxable profits between 43992 euros and 351936 euros;
- or maximum 4114 euros + 15% of taxable profits between 43,992 euros and 351,936 euros, whichever is higher.
Furthermore, if you have never paid money into a PER, or if you have made payments lower than the annual ceiling, it is possible to benefit from even greater deductions. And thanks to the accumulation of the ceiling for the current year with the ceilings which have not been used over the past three years.
And that’s not all. In principle, the ceiling is specific to each member of the tax household. But married or civil partnership couples can decide to pool their ceilings in order to benefit from even more advantageous tax savings in the case where one of the two members of the couple has much higher income.
In principle, savings paid into a Retirement Savings Plan are blocked until retirement. But there are exceptions. An early exit is possible in the event of a life accident. Six scenarios have been planned. Funds can thus be withdrawn before retirement due to the death of a spouse or PACS partner; disability of the PER holder, their spouse or PACS partner, their children; over-indebtedness situation; end of unemployment insurance rights; judicial liquidation of the PER holder’s company; and in the case of purchasing a main residence.
An example of calculating tax savings thanks to the PER
Let’s take concrete examples to illustrate the tax advantage of the new PER.
Its calculation depends on your marginal taxable bracket and the amount you have paid. Let’s imagine that your payments reach the sum of 10,000 euros:
- If your marginal slice is 30%, you make a saving of 3,000 euros (30% of the 10,000 euros paid);
- If your marginal tax bracket is 41%, your savings will be 4,100 euros;
- If your marginal tax bracket is 11%, your savings will be 1,100 euros.
We see it immediately with these examples, the more heavily taxed you are, the more tax savings you will make with the Retirement Savings Plan.
But as your savings payments are subject to a deduction, they will be taxed upon exit, when you reach retirement age. Deducting payments, and therefore reducing the amount of your income tax during your working life, is therefore a very interesting option. This is when you are theoretically taxed the most. Normally, when you gradually withdraw this capital in retirement, you will then be taxed less.
What is the point of giving up the tax deduction?
In general operation, payments into a PER are deductible from taxable income. But you have the option of waiving this tax deduction. This option is irrevocable for each payment. This option is especially interesting for savers with little or no tax. By waiving the deductibility of payments, taxation will be lighter upon exit, at retirement age.
In fact, the reduction in the case of an annuity is higher than that which applies if you deduct your payments. As for the capital outflow, the sums paid will be exempt from tax, only the gains being subject to the single flat-rate deduction of 30%. While by deducting the payments upon entry, the capital paid will be subject to income tax and gains with a single flat-rate deduction of 30%.