Work out your tax benefit from long-term saving

In Belgium, you can claim back up to 30% of the amount you save in the form of tax relief. However, calculating how much you should save is done on an individual basis and depends largely on your income. Moreover, you have to take account of an absolute savings limit of 2,450 euros per year. In an ideal scenario, this form of long-term saving could earn you tax relief of up to 735 euros.

If you want to set aside a small amount of money – for example, because you’ve just started your first job or because you currently have other major outlays – you don't always have to make a detailed calculation. As a rule, people in full-time work who pay taxes in Belgium may put up to 75 euros a month into a long-term savings plan.

For people with a high income, however, the situation is different. If your gross salary is at least 45 000 euros, or 3 750 euros a month, you will likely be able to save the maximum of 2,450 euros every year, or 204 euros per month.

It’s important to remember that the above rules give approximate figures. Your individual situation may differ due, for instance, to the fact that you’re still paying off a tax-advantaged home loan (see further below for more information).

If you don’t want to work with approximations, but prefer instead to calculate exactly how much you’re permitted to put into a long-term savings plan this year, there is a clear formula for working that out: 183.60 euros + 6% of your net taxable earned income. 

It’s important to know that the formula is based on normal earned income, such as a salary. If, say, you receive a replacement income, the right way to go about calculating the maximum amount you can save is explained below.

Let’s take the general calculation rule and apply it in an example:

• Suppose your net taxable earned income is 30 000 euros a year.
• 6% of that income is 1 800 euros.
• Your maximum amount is, therefore, 183.60 euros + 1 800 euros = 1 983.60 euros.
• This amount will earn you annual tax relief of up to 30%, or 595.08 euros.
  

You can find your taxable income on the previous year’s personal income tax assessment. If you file a joint tax return, look under the heading ‘Joint taxable earned income’ to see the net taxable income per partner so that you can work out the individual maximum amounts. Both partners can therefore engage in long-term saving.

If you don't have your most recent tax assessment notice to hand, use the KBC Brussels Tax Planner to calculate your maximum amount based on your income for the current year. It’s best to use this tool when:

• You’re not sure whether you have to pay taxes. 
• You receive replacement income, such as benefits or a pension.
• Your income has fallen or risen substantially over the last year.
• You are still paying off a tax-advantaged home loan.
  

In the past, it was not or barely possible to combine the tax benefit from long-term saving with the tax relief on a home loan. If you took out a home loan before 2016 in Flanders or Wallonia, or before 2017 in Brussels, there is every chance that your housing bonus is already providing you with the maximum amount of tax relief possible. Consequently, you don't stand to gain anything in terms of tax benefits from a long-term savings plan. In that case, you can still combine the tax relief on your home loan with pension saving. 

In the meantime, Flanders and Brussels have abolished the tax relief on new home loans. In Wallonia, this benefit still applies to loans that have been taken out for your one and only home, but you have also been able to combine it with long-term saving since 2016. Therefore, recent home loans don’t have any impact on how your long-term savings amount is calculated.

If things are clear about working out your savings amount, start long-term saving now. If you could use some help first to work out or adjust your optimum savings amount, don’t hesitate to get in touch with us.