Top 11 Tax Minimization Strategies for 2021

We would all like to pay less taxes. Although it is true that without this collective collection, a large part of the functioning of the State would suffer. But we all would like to be able to personally have 100% of our payroll or our assets.

There are many people who try to save taxes bypass the law. However, we do not advise you to do that. In return, what you can do if you are one of the many business owners who would prefer to pay less is read this article.

Because in it we are going to tell you several tax minimization strategies and tips so that you can save on taxes during the year 2021. Keep reading if you want to know what they are.

Take into account the possible deductions according to your autonomy

Did you know that depending on the Autonomous Community in which you are registered, you have the right to according to what tax rebates? Specifically, the Personal Income Tax (IRPF) . Yes, because depending on the regional tax law you may be entitled to a deduction for the educational expenses of your children such as daycare, or for having a domestic employee, for the installation of devices that generate some type of energy saving . And many more.

That is why it is important that to qualify for these deductions that can mean significant tax savings, you inform yourself. Go to a tax agency headquarters or investigate on their online site. Or even if you want to get in touch with an expert in tax matters.

Below are the top 10 Tax Minimization Strategies for 2021

1. Contribute more money to your pension plan

All contributions made to your pension plan and contributions made to other social security products are deductible in personal income tax.

Contributions to pension plans are the option that most allows us to reduce our tax bill among all possible ones. In fact, depending on your income and the total contributions made, it is possible to reduce the tax bill by up to 47%.

2. Don’t wait until 2022 to sell your house, do it in 2021

The new 2021 General State Budgets include a tax increase that affects the personal income tax tables and also savings income. Specifically, a new maximum tranche of 26% is added for earnings over 200,000 euros compared to the current 23%.

In the rent you will have to pay taxes for the difference between the purchase or inheritance price of the house and that of its sale. If you foresee that the sale of the house will generate a profit of more than 200,000 euros, bringing the sale forward to 2020 will save you three percentage points in taxes for amounts that exceed that figure.

3. Bring losses out of your investments to offset gains

A little known option is to show losses from your investments. The taxation of savings allows you to offset capital gains and losses . As an example, if with an investment you obtained a capital loss of € 1,500, you can compensate it with another with which you have obtained a capital gain of € 1,500 to avoid paying taxes.

This does not mean that you should only surface losses when you have another investment with benefits. In fact, you can offset losses in up to four subsequent tax years.

4. Before selling stocks, check your net returns

Selling stocks or making a profit to make up for losses is fine, but check your other income before doing so. From Gestha they remember that if your net income is less than 16,825 euros, you will lose the reduction for work income of up to 5,565 euros if you add capital gains or rental income higher than 6,500 euros.

In the same way, the sale of shares may force you to file an income statement if you add more than 1,600 euros in capital gains or 1,000 euros in gains and 500 euros in losses.

5. Invest in startups

A little-known deduction is one granted to those who invest in start-ups. Taxpayers can deduct 30% of the amounts paid for the subscription of shares or participations in newly created companies in the state tranche.

The maximum deduction amount is 60,000 euros per year. In total, the maximum deduction will be 18,000 euros.

Amounts invested that exceed those 60,000 euros may benefit from regional deductions for investing in new companies.

6. Make donations to NGOs

Donations made in favor of non-profit entities are also deductible in personal income tax . These entities must be covered by Law 49/2002 on the Tax Regime of Non-Profit Entities and Tax Incentives for Patronage.

The deduction depends on the amount of the same and how many years the donation has been made, as follows:

• 80% of the donation if it is less than 150 euros.
• For money in excess of that amount, the deduction depends on whether it has already been made before or not:
• For donations that have been made in less than two fiscal years, the deduction is 30%.
• If the donation has been made in two or more consecutive years, the percentage increases to 35%.

The deduction limit is 10% of the taxpayer’s taxable base.

7. Reductions for working abroad

If you have worked outside of Spain for companies based abroad, you can apply an exemption of 60,100 euros to the income you have obtained as long as a simulated personal income tax is applied in the destination country.

This exemption does not apply if you telecommute for a foreign company.

8. Don’t forget contributions to political parties

The membership fees for political parties, federations, coalitions or groups of voters, allow a deduction of 20% on a maximum of 600 euros per year.

9. Purchase of school supplies

Apart from the state deductions, applicable wherever you live, there are some regional deductions that depend on your community . The most important are those that are awarded for the purchase of textbooks and school supplies.

The communities that currently offer a deduction of this type are Asturias, Aragón, the Community of Madrid, Extremadura, Castilla-La Mancha, the Canary Islands, the Balearic Islands, Valencia and Murcia. Most of them include assumptions by large families , individual and joint declarations

In any case, remember that everything you do not do until December 31 will be included in the next financial year 2021 . So, if you want to avoid tax scares when spring rolls around, the final stretch of the year is the ideal time to get down to it.

10. If you rent a house, invest in it

In case you have to make any expenses in a rented property, bringing them forward to 2021 will help reduce the net income and defer the taxation for the lease, they recall from REAF. If you foresee that your income will exceed 300,000 euros in 2022, it will be more profitable to delay the investment to next year.

11. Advance income before the end of the year

If you have income from work over 300,000 euros, it is advisable to advance the income you can, such as the bonus or certain income in kind. In income 2022 the marginal rate will be two points higher than the current one.