The 2015 Tax Plan Bill envisages the abolition of the elderly allowance. This measure is expected to take effect on 1 January 2016.
The elderly allowance plays on income from savings and investments (box 3). Investment assets are taxed in box 3: bank balances, securities portfolios, real estate (not the owner-occupied home) and the like. Of these assets, €21,139 (double for tax partners: €42,278) is exempt; the tax-free capital.
The tax-free capital is increased by the elderly supplement. To do so, the taxpayer must:
- have reached the state pension age on 31 December of the tax year, and
- have an income from work and home not exceeding € 19,895 and
- The basis of taxation in Box 3 is a maximum of €279,708 (or in the case of tax partners: €559,416).
The elderly allowance is €27,984 (if both tax partners meet the conditions, double: €55,968). If income from work and home exceeds €14,302, the elderly allowance is reduced to €13,992.
The tax in box 3 is equal to 1.2% of the value of the assets to be taxed in that box. The elderly who are currently entitled to the maximum elderly allowance of €55,968 will owe additional income tax after the abolition: 1.2% * €55,968 = €671.
However, the abolition of the elderly allowance could have much more far-reaching consequences. After all, for a number of income-dependent schemes, assets in box 3 are taken into account. For example, there is no entitlement to rent allowance if the applicant's assets to be taxed in box 3 exceed the tax-free assets (including the elderly allowance).
The 2015 Tax Plan was submitted to Parliament on Budget Day 2014. It cannot be ruled out that the measure as described above will be adjusted or even scrapped altogether during the parliamentary debate. The effective date of 1 January 2016 does not necessitate any measures to be taken before the end of the current year, except where use has to be made of schemes that will be terminated as of 31 December 2014 (such as the increased exemption in gift tax with regard to gifts used for the donee's own home).
The above numbers are for the 2014 tax year.