In the income tax return, a number of income and deduction items can be allocated between tax partners as desired. The most advantageous allocation can result in significant tax savings.
The calculation of the most favourable allocation was briefly available in the online tax return on Mijn Belastingdienst. However, when it became apparent that the tool did not work properly in all situations, it was disabled. It has since been confirmed that the tool will not be reinstated during the current tax return campaign.
Tax partners
Married couples and registered partners are considered partners for tax purposes. Unmarried cohabiting couples are considered partners for tax purposes if they are registered at the same residential address and:
- have entered into a notarised cohabitation agreement, or;
- a child was born as a result of their relationship, or;
- the other person’s child has been recognised, or;
- they are registered as partners for the purposes of their pension scheme;
- a minor child of either of them is registered at the residential address.
Income and deductions
The income and allowable deductions that partners may share are:
- balance on the owner-occupied property;
- expenditure on maintenance obligations;
- expenditure on specific healthcare costs;
- weekend expenditure by people with disabilities;
- tax-deductible donations;
- income from a substantial interest (Box 2);
- income from employment and property (Box 3).
Computer programme
Calculating the most favourable allocation is quite tricky, because these days you have to take into account not only the tax rates but also the income-related tax credits. The calculation becomes a lot simpler when it can be done using a computer programme.
Highest income
In the past, it was almost always most advantageous to allocate tax deductions (for example, for the family home) to the tax partner with the highest income in Box 1. However, as the deduction rate is being aligned with the lowest rate for Box 1 (this will be implemented in 2023; in 2022, the deduction will still amount to 40%), this is no longer the case by any means. This is because tax credits increase as income decreases. The fact remains that a sub-optimal allocation can cost you hundreds of euros in additional tax. Are you struggling to work it out? We’d be happy to help.