5 more tips for your 2012 income tax return

In our previous article we talked about expenses which are deductible in the income tax return. We discussed the mortgage interest deduction, medical expenses and educational expenses.

In this article we will discuss tax deductible expenses further and we will also cover the audit topics of the tax authorities.

01. Personal allowance

Many costs, such as alimony, gifts, medical and educational expenses are deductible from your taxable income.

These tax deductions will first be deducted from your taxable income in Box I. Any remainder will be deducted from your income Box III, and finally on your income in Box II. Any remaining amount of the deduction will be carried forward to the next year.

02. Gifts deduction planning

A gift to a public interest (ANBI) is deductible from your taxable income. As a rule, you can claim up to a maximum of 10% of your total income for donations. However, in order to be deductible, your donations must be over the minimum of € 60, and you must take into account the threshold which is 1% of your total income.

For example: if you have a total income of € 40,000 and you have paid € 1,000 to ANBI’s. The excess above 1% of € 40,000 (€ 400) is deductible. In this case you have a deduction of € 600 (€ 1,000 minus minimum threshold of € 400).

03. Allocating deductions between tax partners

Some deductions, such as personal allowance and personal home deductions can be allocated between tax partners. This means that you can allocate tax deductions in the most advantageous manner possible depending on who pays the highest rate of income tax.

04. Entitlement to allowances

If after making all possible deductions you only receive a small refund, or your payable tax is only slightly lowered, then remember that a lower taxable income can mean you are entitled to (more) care or housing benefit, or other compensation such as the childcare allowance.

You can apply for an allowance for childcare, rent and health insurance. The childcare allowance can be applied retroactively within limits, while the health care allowance and housing allowance have a broader retroactive effect.

If you have requested a benefit or allowance it is also  given to you automatically the following year. If your situation or income changes in the next year, you need to notify the tax authorities yourself in order to avoid having to pay money back at the end.

05. Additional inspection by the tax office

Each year the tax authorities announce audit topics. These are points which the tax authorities intend to pay extra attention to.

For 2012 the tax authorities will pay extra attention to the following topics:
– Increase of the mortgage;
– The deduction of annuity premiums, and
– The deduction of medical expenses