5. Calculating Your French Income Tax Liability
The standard tax breaks in France take the form of either tax relief (réduction d’impôt), or a tax credit (crédit d’impôt).
A réduction d’impôt is an allowance against the amount of income tax payable, whilst a crédit d’impôt is a payment to you by the tax authority.
A tax credit will, therefore, be paid to you, even though you may pay little or no income tax in France.
5.4.2. Home Energy Conservation
An tax credit of 30% is available for the installation of certain energy conservation works in the family home.
Second homes are not eligible.
The allowance is called Crédit d’Impôt pour la Transition Energétique (CITE).
Normally only the material costs have been eligible, but in the case of some works labour costs can also be charged.
However, the tax credit is only available if the work is carried out by a professional tradesman, so DIY schemes are not eligible.
The maximum eligible costs are €8,000 per person, or €16,000 for a couple.
The rules are quite complex and caution is needed.
You can read more information at Tax Credits for Home Energy Conservation in France, although there are changes that occured in 2020 which we will post in due course.
5.4.3. Home Adaptations
An allowance of between 25% and 40% against the cost of specific works to give greater mobility or safety to elderly or disabled persons in the home.
The allowance is called Crédit d’impôt pour certaines dépenses d’équipements de l’habitation principale en faveur de l’aide aux personnes.
The sum cannot exceed €20,000.
5.4.4. Child Care
An allowance of 50% on expenditure up to a maximum of €2,300 per child under 7 years of age towards the costs of child care outside of the home, called les frais de garde d’enfants.
Only those costs actually incurred by you are eligible, so if you receive assistance from your employer, or the social security system, the allowance is only available on costs net of this assistance.
No allowance is payable where the child is attending a maternity school.
We published an article about this tax credit in our September 2020 Newsletter, which you can read at Childcare for Employees and Business Owners.
5.4.5. Domestic Help
A tax allowance of 50% against the costs of assistance with domestic services at your home, called Crédit d’impôt accordé au titre de dépenses pour l’emploi d’un salarié à domicile.
Despite the name given to this tax concession, you are entitled to either employ someone direct or use an accredited home services organisation.
No condition of age, health, income or employment status is stipulated. It can also be in connection with your main residence, or a second home in France, but you must be tax resident.
The duties can include cleaning, gardening, driving, child care, health care, cooking etc. The person engaged cannot be a member of the household.
There are ceiling limits on any particular type of work. Gardening costs are only eligible up to a maximum of €5,000, whilst minor building work is only eligible up to €500 and computer assistance €3,000.
There is also a basic cost ceiling against which the tax credit will be granted of €15,000, in the first year if you use an employee, up to €12,000 in subsequent years. It is €12,000 if you use an external organisation.
The limit is increased to €20,000 in the case of those who have a serious incapacity.
Minor increases on the limit if dependants in the household, but the cost ceiling cannot be greater than €15,000.
Thus, a married couple with three children incur costs of €18,000 for a domestic employee. The basic tax credit is €12,000. There is an increase of €1,500 per child for the tax credit, giving a total of €4,500. The theoretical credit is therefore €16,500 (€12,000 + €4,500). However, the maximum amount of the costs eligible for the tax credit is €15,000. That grants a 50% tax credit equal to €7,500.
You can read more about the tax credit in a substantive review we published in French Tax Break for Domestic Help.
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