This article has been machine translated from Czech. Please excuse any mistakes in translation. If you find any, I will be glad if you tell me about them.
With less than four weeks to go until the end of the year, in addition to shopping for gifts, finding a carp and decorating the tree, this is the last chance to influence the amount of your taxes or any refunds for the 2022 tax year.
So let’s take a look at what deductible items we can still affect before the end of the year.
How does it work?
Deductible items can be found on lines 46 to 53 of tax return (self-employed) or at the bottom of the first page annual settlement requests (employee). In this way, we can reduce our tax base and lower our income tax by 15%.
For example: if the sum of deductible items is CZK 100,000, the entrepreneur pays CZK 15,000 less in taxes and the employee gets CZK 15,000 back from the tax advances he regularly pays on his gross wages.
Gratuitous transactions – donations
The very first item we can deduct from the tax base is the value of the donations. So who isn’t dobrýanděl.cz yet or have not yet considered another charitable contribution, Christmas time is definitely the ideal time to do so. Sharing a slice of your pie not only warms the cockles of your heart, it saves you money on taxes. I can’t imagine a better win-win scenario.
We can also donate blood or blood plasma (free of charge). In such a case, the relevant point of consumption shall issue a certificate in January of the following year with the sum of the readings for the whole year.
If I put CZK 1 000 a month into my pension, I already get a bonus of CZK 230 in the form of a state contribution. However, if I give more than CZK 1,000 per month, I can deduct this from my tax base up to CZK 24,000 per year. This means that I will get the maximum benefits with my own contribution of CZK 36,000 per year (the employer’s contribution does not count). The up to CZK 24,000 for deduction can also be deposited into the pension fund in a lump sum before the end of the year. Savings of 15% can amount to CZK 3,600.
It is also interesting for the owner of a limited liability company that the contribution to the employee’s pension up to CZK 50,000 per year is a real wage expense, from which no social security, health or tax is deducted. Great for premiums, for example. And that employee can also be the owner of the company itself, whether he is employed on an HPP, VPP, FTE, DPP or on a simple contract for the performance of the executive function. And the contribution does not have to be monthly, but once a year in December in the amount of CZK 50 000.
It is possible to withdraw up to CZK 50,000 from the company each year without social security, health and tax contributions.
Contribution to life insurance
The state also allows you to deduct up to CZK 24,000 from the life insurance paid. However, we are talking here about the investment part of the insurance. However, saving in a life insurance policy has perhaps never made sense and so if you are deducting life insurance, I would recommend considering whether such a policy contains more cost in the form of fees than real benefit.
If you are repaying a mortgage or building society loan on the property you live in, you can also deduct the interest paid (interest only, not the whole repayment). The amount of the deduction is limited to CZK 150,000 for loans contracted from 2021. For loans arranged earlier, including refinancing, the previous limit of CZK 300,000 per year applies. Resp. the decisive date is not the signing of the loan agreement, but the exact date when the housing need was acquired. Banks send confirmations as early as January of the following year.
So if you’re saving for retirement or want to contribute to a good cause, you still have a chance to take advantage of this before the end of the year and reduce the amount you pay in income tax.
I’ll be happy to explain how to do it and other details.