Tax averaging where allowed can bring you a lot of money

in #money5 years ago (edited)

Having worked in corporate departments for some decades I know many countries allow companies but also private persons certain tax benefits returning/lowering your tax paid. The idea behind it is that although you are taxed each calendar year the tax office is prepared to look at a longer period (often 3 or 5 years).

This way losses in a certain year 3 are leading to a return of tax paid in year 1 and 2.

But what is in it for you as private person?

Well many countries offer their citizens (3yr) tax averaging which might mean cash back especially when you have high income in one year and a low(er) income the next one or two years. The income tax after this period - at request - is recalculated based on the average income per annum.

Also when you quit your job (retire or getting jobless) this should be checked carefully if it applies. You often have a much lower income or even zero after you quit a job.

Example:
Country rules: tax% on first 50 K = 35%; tax above 50K = 50%; income threshold : 5K

Year 1
Income 100K
Tax paid 40.75 ((50K-5K)*35%) +(50K * 25%)

Year 2 and 3 : Income zero
tax paid zero

Averaging request after year 3 is done:

Average income : 33K
Tax year 1 9,8K ((33-5)*35%)
Tax year 2 9.8 K
Tax year 3 9,8 K
Total tax: 29.4 K

Tax return : 11.35 K (40.75 - 29.4)

  • year one zero, year two 100K and year 3 zero gives the same outcome. Take in as much years of low income.

What is the US situation ?

In the US - sorry guys - it is no longer open for everyone but only farmers and fisherman have these advantages still. source

Europe/Australia

In Europe there are countries like the Netherland but others as well who allow averaging , same in Australia.
One should request it within a small period after the third year you wanna include in the averaging is closed. And each year can only be incuded once in such a request.

regards
Goldrooster

Sort:  

You got a 59.78% upvote from @joeparys! Thank you for your support of our services. To continue your support, please follow and delegate Steem power to @joeparys for daily steem and steem dollar payouts!

Thank you for using CryptoSicko!

Well done and thank you for joining and supporting my subscription based upvoting bot that provides you with daily upvotes in exchange for your spare STEEM POWER.
Delegation links for CryptoSicko
100SP 250SP500SP

To listen to the audio version of this article click on the play image.

Brought to you by @tts. If you find it useful please consider upvoting this reply.

Thank you so much for participating in the Partiko Delegation Plan Round 1! We really appreciate your support! As part of the delegation benefits, we just gave you a 3.00% upvote! Together, let’s change the world!

Thank you for the steem.

Coin Marketplace

STEEM 0.31
TRX 0.12
JST 0.034
BTC 64418.55
ETH 3157.64
USDT 1.00
SBD 4.06