Income Tax Relief in France for Children
Thursday 03 March 2016
Financial support to an impecunious adult child is tax deductible in France, whatever their age, marital status or place of residence.
We can distinguish two tax breaks in France to parents who support their children, one for those with children under 18 years of age, and one for adult children.
Children Under 18 Years
The tax system supports dependent children under the age of 18 years through what is called the quotient familial.
Broadly speaking, this is a method of determining the amount of income tax you will pay by taking into account the size of your household, as well as certain other personal circumstances.
In effect, it enables a household to divide their net annual income by the composition of the family, before application of the income tax bands.
The net income having then been divided by the number of 'parts', the tax bands are applied against each income slice, with the resultant figure then multiplied by the number of parts.
By option, a child between 18 and 21 years can also be attached to the tax household.
If the child is between 21 and 25 years and pursuing their education, you can also opt to include them in your fiscal household for the purposes of the quotient familial.
Children Over 18 Years
The system also allows parents to provide direct financial or equivalent support to their adult children, which they can they charge against their income tax.
This support is called a pension alimentaire, which may be provided either in cash or kind.
In the case of children who live with you under 21, or aged less than 25 years but pursuing their education, you can either:
- Opt to attach them to your fiscal household (rattachement) or;
- Charge the support you provide to them against your liability to income tax (pension alimentaire).
Under no circumstances can you obtain both rattachement and the pension alimentaire.
In a future Newsletter we will consider the how to elect for the best option in such cases, but for now we consider those children for whom it is not possible to attach to your fiscal household.
In such cases, the support you provide to them is tax deductible, subject to particular conditions.
This means that your taxable income is reduced by the amount of the support.
This deduction is available whether or not the child(ren) lives with you, and irrespective of their age, activity, marital status or place of residence.
The amount of the maximum deduction varies according to the circumstances of your child. The figures below are for 2015 income, taxed in 2016.
- For a child who is single the deduction cannot exceed €5,732 per child per year.
- Where they have a child, and are single, divorced or widowed, then the maximum deduction increases to €11,464.
- Where they are married or in a civil partnership the maximum deduction is €11,464, although only provided they are not supported by both sets of parents.
Where the child does not live with you, you may be required to demonstrate to the tax office the payments or other forms of support you have given with them. So claiming relief for adult child support does increase the risk of a tax investigation.
Where they live with you the need for supporting documentation only applies where the level of the support exceeds €3,407, a threshold that is assumed to cover the normal costs of board and lodging.
It does not matter that the child may not live in France; provided you can demonstrate you are supporting them it is deductible.
However, it is only deductible on the understanding that such support is needed by your child, not merely a way obtaining tax relief!
The test is not automatically carried out, but if your circumstances are examined by the tax authority it can be safely said that if the income of your child does not exceed the French minimum wage (currently €17,600pa) it will be accepted.
Even if it does exceed this sum, if they have a family to support it is likely it will be accepted, within reasonable limits.
The pension alimentaire you declare will also need to be declared by your child if they are resident in France, which could well mean that they themselves become liable for income tax, or their income tax payable increases.
You need to do the sums to see if works for both of you. In the vast majority of cases it should be beneficial, as the pension alimentaire only qualifies as such for children who do not have sufficient income to properly provide for themselves.