There is just one month left in the year, and taxpayers are weighing options to lower their tax burden before December ends. In these final 31 days, it is still possible to reduce Personal Income Tax (IRPF) liabilities by following guidance from seasoned experts. Some economists advise adjusting withholdings and asking employers for adjustments in compensation structure to optimize the year-end tax outcome.
IRPF is the personal income tax that applies to all income earned by an individual, including wages from employment, self-employment, real estate activities, investment income, and capital gains or losses. With the total annual income in view, the tax rate bands determine the percentage paid to the treasury, calculated progressively as income rises:
- From 0 to 12,449 euros: 19%
- From 12,450 to 20,199 euros: 24%
- From 20,200 to 35,199 euros: 30%
- From 35,200 to 59,999 euros: 37%
- From 60,000 to 299,999 euros: 45%
- More than 300,000 euros: 47%
This tax is comprehensive, covering not only wages but also gains from investments, inheritances, and real estate transactions. It ultimately affects many financial decisions throughout the year. When managed well, it can meaningfully reduce the amount retained by the government for the taxpayer’s benefit.
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Advice from economists
Leading experts emphasize that maximizing after-tax income often involves shifting portions of compensation into non-taxable or tax-favored benefits. Employees may have the right to request that their employer provide part of their pay in kinds or benefits—such as health insurance, meal vouchers, transportation subsidies, or child care assistance. These benefits are generally exempt from IRPF and are not counted as salary for tax purposes.
Other commonly recommended strategies include contributing to a private pension plan to build retirement savings, making charitable donations to eligible organizations to obtain deductions, and carefully planning capital gains and losses. These moves can influence the final tax bill, especially when done before December 31 to count toward the current year. Individuals should consider how property transactions, inheritances, or other asset events will impact their taxes and execute decisions with that timing in mind.
The 65 and over group has particular advantages
Individuals aged 65 and older may access special tax advantages that apply specifically to them. In some cases, the sale of a primary residence can be exempt from capital gains tax, with the resulting profit going directly to the seller. If both spouses are over 65, the exemption may apply to both. It is important to confirm who qualifies based on current rules and the ownership structure of the residence.
Taxpayers should also monitor other income streams. An income statement generally becomes mandatory when income surpasses thresholds such as 22,000 euros from a single payer or 14,000 euros from multiple payers. If there is a second income stream, the aggregate income beyond certain thresholds must exceed 1,500 euros annually to trigger reporting or tax considerations.