Personal deduction and negative personal deduction

In the past, completing the annual tax return was a memorable moment. There were many deductions to supplement your wallet. Those times are behind us. There are still deductions, but they have been significantly reduced. In our current tax system there are deductions that are stuck in one of the boxes. For example, the expenditure for income provision (annuity premium) is included in box 1. The personal deduction is a collection of deductions that are not linked to one box, but to all boxes. A fixed order is maintained. You must first offset the deductions with the income in box 1 (income and owner-occupied home), according to box 3 (your assets) and if there are still deductions left, the remainder may fall into box 2 (substantial interest). We will explain in more detail what is meant by personal deduction and negative personal deduction.

Personal deduction

The personal deduction is the sum of personal deductions in the relevant tax year and personal deductions from previous years that have not previously been deducted. The deductions that fall under this heading are:

  • Expenses for maintenance of children under 21 years of age
  • Paid alimony and other maintenance obligations
  • Expenses for specific healthcare costs
  • Education expenses and study costs
  • Gifts
  • Costs of listed buildings
  • Waiver of venture capital on loans granted before January 1, 2011
  • Expenses for a weekend visit by a severely disabled child (over 26 years old)

The first four deductions in particular will occur frequently and are briefly discussed below. The elaboration is based on the scheme as it existed in the 2012 tax year.

Negative personal deduction

It may happen that you have wrongly charged a certain deduction item in previous tax returns. You can correct this by entering a negative personal deduction. For example, you could consider part of the alimony paid that you received back because too much was paid out.

Expenses for maintenance of children under 21 years of age

You are entitled to this deduction if you support a child who is not yet 21 years old, for which you are not entitled to child benefit and the child is also not entitled to student finance. Until January 1, 2012, these costs were deductible up to the child’s age of 30. Your living expenses must be at least 408 per quarter (2012).

Paid alimony and other maintenance obligations

The deductible item consists of alimony, but lump sum payments to pay off the alimony in one go also fall under this deductible item. These must concern claims that are legally enforceable or that arise from an urgent moral obligation to provide for one’s livelihood.

Expenses for specific healthcare costs

Taxpayers with high medical costs may be entitled to an additional deduction. These must involve significant costs that you have to bear yourself, otherwise you will not exceed the threshold amount. Based on the 2012 scheme, a minimum threshold of 125 applies. For taxpayers with a threshold income up to 39,618, the threshold amount is 1.65 percent of the threshold income.

Education expenses and study costs

Costs you incur for training to maintain your current job or to improve your financial and economic position are deductible. In 2012 the threshold amount was 250. The costs must relate directly to the training. For example, expenditure on professional literature is not included.