Tax cut explanation, methodology, and scope:
A tax deduction is a reduction in the taxable base permitted by the tax authority to reduce one's tax bill. Here's everything you need to know about tax deductions in France, from their types to who can benefit from them:
What is a tax deduction?
A tax deduction is a reduction in the taxable base that lowers your taxable income, consequently decreasing your tax liability. There are two main types of tax deductions: fixed and proportional. Fixed deductions are set amounts, while proportional deductions are a percentage of the relevant income.
The difference between tax deductions, tax reductions, and tax exemptions
Although often confused, a tax deduction, tax reduction, and tax exemption all have their distinct roles:
- A tax deduction (before tax) reduces the taxable income, effectively lowering the tax base for the tax rate to be applied.
- A tax reduction (after tax) reduces the gross tax paid after the initial tax has been calculated.
- A tax exemption (before tax) removes the exempted amount from the tax base, eliminating tax on that specific amount.
Why does the French state offer tax deductions?
The French state offers tax deductions to lighten the tax burden, encourage certain behaviors, and ensure greater fiscal equity. Deductions help recongnize the existence of necessary expenses or particular situations, making taxation more progressive and fair.
How do tax deductions work in France?
The goal of a tax deduction is to lower the net taxable income base. It can be a flat amount or a percentage of the declared amount. The deduction comes before tax is calculated, reducing the sum upon which the tax rate will be applied.
To calculate the taxable income, first, determine the gross amount (e.g., income, capital gains, or transfer value). Next, apply the tax deduction, and finally, calculate the tax on the reduced amount using the appropriate tax brackets.
Who can benefit from tax deductions in France?
Professional tax deductions
Employees, salaried individuals, and self-employed people can benefit from tax deductions depending on their specific situations. All employees benefit from a 10% proportional allowance for their professional expenses. Self-employed individuals with a micro-entrepreneur (formerly auto-entrepreneur) status might be eligible for a variable allowance rate depending on their activity.
Real estate capital gains tax deductions
Capital gains tax deductions based on the holding period gradually reduce the portion of the capital gain subject to tax, with progressively higher allowances for longer holding periods. Properties held for more than five years qualify for these allowances.
Inheritance or donation tax deductions
In the context of inheritance or donation, the allowance varies depending on the degree of kinship between the deceased and the heir or donor and donee. Allowances are capped for children of the deceased, siblings, and distant relatives. There is no allowance for people with no family relationship. For gifts to PACS partners, allowances follow the same progressive scale as those for spouses.
Life insurance deductions
In the case of life insurance, the allowance applicable to each beneficiary depends on the age of the policyholder when the funds are paid out. Funds paid before the policyholder reaches 70 years old benefit from an allowance of €152,500 per designated beneficiary, while funds paid after the policyholder reaches 70 years old have a global allowance of €30,500 for all beneficiaries and all the policyholder's contracts.
Tax deductions for people over 65
People over 65 can benefit from a specific tax allowance on their taxable income, provided they meet specific income conditions. In 2025, eligibility is limited to those aged 65 or older with a net global income (before tax deductions) of €28,170 or less. Those with disabilities can also benefit regardless of their age.
Tax deductions for retirees
Retirees can benefit from a flat-rate tax deduction of 10% on their retirement pensions, with a ceiling of €4,321 per tax household in 2025. The deduction applies automatically by the tax administration. Proposals to eliminate this deduction have been made in the context of restoring public finances.
Tax deductions for journalists
Professional journalists can benefit from a specific tax deduction of €7,650 on their taxable income, subject to certain conditions. To qualify, the journalist must exercise a journalistic activity, such as being a journalist, editor, photographer, newspaper director, or dramatic or musical critic. The journalist must also have an annual gross income of less than or equal to €93,510, and the deduction applies only once, even if the journalist has multiple employers.
Childminder tax deductions
Approved childcare providers for the children's station can benefit from a flat-rate tax deduction, designed to compensate for expenses incurred in the children's interest. The deduction is calculated per child and per day of care, based on the duration of care and the child's situation.
Income tax calculation with deductions
The tax administration applies the deductions automatically during the calculation of income tax, regardless of the domain (income, donations, inheritance, life insurance, etc.). Deductions are sometimes capped, which might impact tax liability for some taxpayers.
- A tax deduction in France functions as a reduction in the taxable income for both fixed and proportional expenses, thus decreasing an individual's tax liability.
- The French state offers tax deductions not only to lighten the tax burden but also to promote specific behaviors and ensure fiscal equity, recognizing necessary expenses and particular situations.
- Tax deductions for professional expenses can benefit employees, salaried individuals, and self-employed individuals in France, with a 10% proportional allowance for all employees and varying allowances for self-employed individuals based on their activity.
- In the event of real estate capital gains, tax deductions based on the holding period can lower the portion of the capital gain subject to tax, with higher allowances for longer holding periods.
- For journalists in France, a specific tax deduction of €7,650 is available on their taxable income, subject to specific conditions and a maximum income limit of €93,510 annually.
