With the final weeks of the year approaching, taxpayers have a key opportunity to optimise their tax situation and reduce their tax liability on the following year’s income tax return. For this reason, the Spanish Association of Tax Advisors (AEDAF) reminds us that during this period, there are various strategies available to adjust the taxable base, increase deductions, and, in general, make decisions that could result in significant savings on next year’s income tax return.
Therefore, it is crucial to take advantage of this window of time to plan fiscal management properly and avoid surprises or unforeseen circumstances when the tax return deadline arrives. Here is a summary of the key measures taxpayers can adopt before the year ends, with the aim of efficiently reducing their tax burden.
Measures to Optimise Taxation
- Contributions to Pension Plans: Contributions to pension plans are one of the most effective ways to reduce the taxable base for personal income tax (IRPF). These contributions can be made until December 31, with an annual limit that varies depending on the taxpayer’s age. For those under 50, the contribution limit is €1,500, while for those over 50, the limit increases to €2,500. By contributing to a pension plan before the end of the year, taxpayers can achieve a direct reduction in their taxable base for IRPF, which can lead to immediate tax savings.
- Investments in Start-Up Companies: Investments in start-up companies can benefit from tax deductions at both the regional and national levels. These deductions may vary depending on the autonomous community in which the investment is made. It is also important to note that taxpayers must meet certain requirements to benefit from these deductions.
- Donations to NGOs and Social Interest Entities: Donations to non-profit organisations can be deducted from the taxable base. These contributions not only support social causes but also provide tax benefits. It is advisable to check which entities are officially recognised as being of social interest, as only donations to these entities will allow for the corresponding deduction.
- Compensation for Capital Losses: In the final weeks of the year, taxpayers who have incurred capital losses from the sale of assets (stocks, property, investment funds, etc.) can offset them against capital gains earned in the same tax year. This offsetting helps to reduce the taxable base, as losses can be deducted from the gains generated in the same year. If the final balance is negative, these losses can be carried forward to future years.
- Review of Mortgage Situation: Taxpayers with mortgages should also review their situation before the year ends. Those paying mortgage interest may be able to deduct part of these payments on their income tax return, provided the mortgage was taken out before 2013 and certain conditions are met. Additionally, if the mortgage has been transferred or modified, the deduction for the acquisition of a primary residence may still be applicable.
- Reviewing the Taxation Model: Some taxpayers may benefit from changing their taxation model based on their personal tax situation. For example, married couples may choose to file separately or jointly, and in some cases, the most beneficial option may depend on each individual’s income and deductions.
What are the implications of these measures?
While all these measures can be useful for reducing the taxable base and, consequently, the tax burden, it is important to remember that they must be implemented correctly to avoid issues with the Tax Agency. Advanced tax planning is crucial to ensure these decisions are effective and not made last minute, leaving no time for adjustments.
It is also essential to ensure that the measures taken comply with current regulations. Therefore, seeking advice from a tax professional is key to correctly applying these strategies, avoiding mistakes and potential penalties.
What should taxpayers do?
In the final weeks of the year, taxpayers are advised to meet with their tax advisor to assess their specific situation and determine which of these measures are most suitable based on their personal and professional circumstances. An experienced advisor will be able to provide the necessary recommendations to optimise taxation and ensure compliance with tax obligations without any unpleasant surprises.
