A tax refund or back taxes? Here’s how you can affect your taxes
You might think that managing taxes is something only businesses need to worry about, but even ordinary people can affect their taxes by being smart and prepared. Kalle Määttä, a part-time tax law professor at the University of Vaasa, has some tips to share with you.
Home office deduction. The shift to working remotely brought to light the possibility of claiming a home office deduction. The deduction can be up to €920 per year if you use your home office to earn your main income and your employer didn't provide you with a workspace. Part-time workers, like teachers, can claim up to €460 per year. Even if you use your home office for occasional side work, you can still claim a deduction of €230 per year.
Work tools. If you are working from home, you may be able to deduct the costs of work tools and data connection expenses from your taxes. Work tools may include a computer screen, keyboard, camera, or home internet connection. All salaried employees automatically receive a €750 deduction for earning income. You can claim the costs of remote work as deductions on your tax return once this threshold is exceeded.
Travel expenses. The deduction for travel expenses is likely the most familiar deduction for taxpayers. The maximum amount is usually €7,000 per year, but temporarily until the end of 2023, it has been increased to €8,400. Keep in mind that you can only deduct travel expenses to the extent that they exceed €750 in the tax year. The deduction is typically based on the cost of the cheapest mode of transportation.
Can you claim tax deductions for travelling to work from a summer cottage, for example?
– It depends on the location. Travel expenses from a summer cottage cannot be greater than those from your home. If the cottage is further away from your workplace than your home, the expenses of commuting from home to work are deductible. If the cottage is closer to your workplace than your home, the expenses of commuting from the cottage to work are deductible, Määttä specifies.
Work clothes. According to the Income Tax Act, a taxpayer is entitled to deduct costs incurred from obtaining or maintaining their income. These so-called natural deductions include work clothes. The wording of the law is difficult, so ultimately, the Supreme Administrative Court resolves ambiguous cases. Examples of accepted deductions include a professor's doctoral hat for a conferment ceremony and a tailcoat used solely for official duties. However, it is not always clear which clothing is used solely for work and which can be considered for personal use too. The same credit threshold of €750 for income deductions applies to work clothes and you can only claim the deduction once the threshold has been exceeded.
Household expenses. The deduction for household expenses has a maximum of €2,250 per year and is granted only if the deductible portion of the costs exceeds 100 euros. You can use this deduction for services like cleaning and maintenance or improvement work on your home or holiday home. If extensive work is done on a summer cottage, for example, in one year, part of the deduction may go unused. Consider dividing the renovation into two years so you can claim the deduction for household expenses for each year. Keep in mind that you are not allowed to divide the renovation into different years just to avoid paying taxes.
Tax evasion. Artificial tax planning is restricted by regulations. While taxpayers are entitled to take measures to minimise their taxes, illegal actions aimed at obtaining tax benefits are prohibited. Tax evasion can be prevented by the general provision of the Tax Assessment Procedure Act. It can be applied, for example, when an attempt is made to tax earned income more leniently as capital income or when business income is taxed as capital gains.