April is packed with fun—from Easter parades to the onset of spring. But it’s also the start of income tax season, which can be stressful. And because N26 wants you to enjoy tax season without the hassle, we’re here to help you understand what types of expenses you can deduct from your freelance income to benefit from some serious tax savings.
Expenses you can deduct from your personal income tax
When it comes to tax deductible expenses, the Spanish tax bureau has some strict requirements. First, these deductions are only available to freelancers or the self-employed. Second, the expenses need to be accompanied by invoices or receipts which include all relevant tax information. The freelancer also needs to include them in their accounting records as official expenses.The different regions of Spain apply slightly different deductions, which in turn can affect the income tax owed. For example, Madrid applies a deduction of 20% for primary residence rentals for those under 35 up to a maximum of €840, while Catalonia’s 10% deduction applies only to those under 32, and to large families. Andalusia, on the other hand, offers a 15% deduction of annual rental costs for those under 35. To learn what kinds of deductions are available at a national level, read on.
Home mortgages
Not all taxpayers who pay a mortgage on their main residence are able to deduct it. This only applies to homeowners who signed their mortgage before January 1, 2013, and who have applied the deduction to previous tax returns. If you meet these requirements, you’ll be able to deduct up to 15% of your mortgage payments up to €9,040. This deduction also includes associated expenses, such as home insurance, life insurance, early mortgage repayments, and fire insurance.
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Although pension plans are generally considered employment income, contributions to pension plans reduce the tax base of yourincome tax return. If you contribute €3,000 per year, for example, you can deduct all of it from your freelance income. This means that if you earn €25,000 per year, this deduction alone would mean that you’ll only pay taxes on €22,000.
Donations to non-profit organizations
If you give money to sports federations, foundations, or non-governmental organizations (NGOs), you can save up to 80% of the first €150 donated, and 30% on any additional donation. And, if you’ve donated an equal or higher amount to the same entity during the two previous tax years, you can save 35% of the donation amount.
Trade union dues, contributions to political parties, and professional associations
If you pay membership fees for a political party, a trade union or a professional association, you can also benefit from some attractive deductions. The percentage differs depending on the type of group to which you contribute:
Professional associations. If membership in a professional association is essential to your job, you can deduct up to €500 of your dues per year.
Political parties. For contributions to political groups, you can deduct 20% of payments made, up to a maximum of €600 per year.
Trade unions. Deductions for union dues range from 20% to 35% and are not subject to any limitation on the amount contributed.
Upgrades to improve energy efficiency in the home
According to Article 1 of Royal Decree-Law 19/2021, taxpayers may benefit from a deduction of 20%, up to a maximum of €5,000 for work done on their main residence with the aim of reducing heating and cooling demand by a minimum of 7%. This deduction does not include work on swimming pools, gardens, storage rooms, sports facilities, parking spaces, or in areas of the home dedicated to a business activity.
Renting a home
This type of deduction is only valid at a national level for leases signed before 2015. It allows you to deduct up to 10.05% of your rent from a maximum base of €9,040 per year. The deduction for more recent rentals depends on the region in which the taxpayer resides.
Investments in business ventures
If you buy shares in a newly created company up to a maximum value of €60,000 you’ll be able to deduct up to 30% of the investment cost. For this deduction to apply, you can’t own more than 40% of the company. What’s more, the company’s capital must not exceed €400,000, and it must not be listed on the stock exchange.
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Need to file taxes but don’t know where to start? With N26, you can pay your taxes quickly and hassle-free: from income tax returns, self-employed fees, investment and cryptocurrency trading commissions, to expat taxes—everything from the mobile app, without leaving home.Organize your expenses with personal and self-employed accounts using real-time notifications and smart tools like statistics, so you won’t miss any details of your tax obligations and stay compliant with the tax authorities.Keep your finances up to date and file your taxes headache-free with N26.
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