Many taxpayers will notice a reduction in their income tax refunds this year, or may even find they owe taxes, due to adjustments in withholding tax tables made last year. If you are in this situation, there are strategies you can employ to increase your refund or decrease the amount owed.
“For many families, the income tax refund is an opportunity to cover unforeseen expenses. However, this year, taxpayers are faced with lower-than-usual refunds or the reality of owing additional taxes. Nevertheless, there are details to consider before submitting the tax return that can help reduce the tax payable or maximize your eligible benefits for a larger refund“, explains the DECO PROTeste.
The consumer protection organization has prepared a guide with five tips to consider when filing your tax return:
1. Enter Expenses Manually
If you did not validate all expenses correctly, did not enter them in time, or have additional expenses to report that do not appear on the e-fatura system, such as education expenses incurred abroad, you can still enter them manually when completing your tax return.
This can be done in box 6-C of annex H, where you are asked if you wish to declare expenses as an alternative to the e-fatura. Respond “Yes” to manually replace the calculated expense totals with your new totals. Retain proof documents for four years in case the tax authorities request justification for the manually entered values. If you prefer the tax authorities to consider everything already validated in the e-fatura, you should answer “No”.
2. Introduce Expenses for Domestic Services
One new aspect of this year’s tax return is the ability to deduct 5% of domestic service expenses, up to a limit of 200 euros. Before submitting the return, ensure these values are correct and pre-filled. If these expenses do not appear on the e-fatura, manually enter them in box 6-C of annex H. As explained previously, you will need to enter the new totals for expenses incurred in 2024 manually. Fill fields 680 to 682 using code 666 to record domestic service expenses, identifying the family member who bore the cost, the worker’s tax identification number, and the expenses incurred.
3. Include Interest from Fixed Deposits and Savings Bonds
Including interest from fixed deposits or savings bonds in your tax return can also increase your refund. However, this option is only beneficial if your annual taxable income is less than 21,321 euros. This way, you will be taxed at a rate lower than the default 28% applied to these interests. If your income is above 21,321 euros, it may not be advantageous to include them, as the applicable rate through inclusion would be higher than 28%.
To avoid potential errors, simulate both options before submitting your tax return to determine the most beneficial choice. Include interest from fixed deposits or savings bonds in the tax return by completing annex G.
4. Young Individuals with Income up to 8,500 Euros Should Not File Tax Returns
Taxpayers with annual income below 8,500 euros are exempt from filing a return. For young individuals, this is also a way to avoid losing a year of IRS Young benefit eligibility. A taxpayer in this income bracket does not benefit from IRS Young, and choosing not to file stops the clock on this fiscal benefit, which can resume in the future if income levels permit obtaining a benefit.
For taxpayers over 35 years old and not covered by IRS Young, filing a tax return—though not mandatory—could offer advantages. If withholding was done, a refund might be received.
5. Check Values Before Accepting Automatic Tax Return
While the automatic tax return simplifies the process for many taxpayers, it may not always yield the best solution. It is advisable to simulate a manual submission, which may offer a larger refund. The tax authorities make a proposal based on available data, but omissions can be addressed by adding missing information before submission. Moreover, the automatic system defaults to separate filing, whereas joint filing might be more beneficial.
