Tax indexation suspended

The corona crisis costs money. Lots of money. That's why the government looks for extra income. One of the measures which was applied earlier, is the index stop in personal income tax. An almost impalpable tax increase.

Old wine in new bottles

For tax years 2021 up to 2024, the indexation of a number of tax deductions is frozen to the level of the indexed amounts applicable for tax year 2020.
The Michel government previous did so in 2014, by interrupting the indexation of a number of tax deductions for the tax years 2015 until 2018.
Attention: after the interruption, the indexation is not picked up where is was stopped. No, the calculation obtains a new starting point in 2024 (as it was the case in 2018).

As it was the case with the previous interruption, we can speak of a certain 'retroactivity'. The measure applies as from tax year 2021. This means in practice that it applies to the 2020 income.
The indexed amounts which apply to 2020 were published in January 2020 in the Belgian Official Journal. As a consequence, this notice is partly annulled.

Which expenditure?

The indexation does not apply to all personal income tax amounts. E.g., the tax free minimum and child increases do not fall within this scope and are further indexed.

What is covered?

the exempt first tranche for income from saving deposits, dividends, interest with social purpose and the amount of loans through a crowdfunding platform for which the interest is exempt (would become 990 euro, remains 980 euro);

the tax basket for the tax reduction for long term savings (as from tax year 2021) and the first tranche for loans (loans obtained as from 1 January 2020);

tax reductions for obtaining employer's shares;

tax reductions for expenses in order to acquire an electric vehicle (would become 3.180 euro, remains 3.140 euro);

tax reductions for expenses for a development fund (would become 400 euro, remains 390 euro);

tax reduction for donations (remains 40 euro);

tax reduction for house staff;

tax reduction for expenses as part of an adoption procedure;

tax reduction for premiums for legal expenses insurance (was and remains 310 euro);

tax reduction for low energy houses, passive houses and energy-neutral houses; and

qualifying expenses for the deduction for own and only home which is converted in a federal tax reduction.

The indexation of the amounts for tax reductions for pensions and substitution income is continued.

Pension saving

The interruption of the indexation of the maximum amounts for pension savings is postponed until tax year 2022. Beginning 2020 it was communicated that the maximum amount for pension savings would amount to 990 euro (30%) or 1.270 euro (25%). Who already saved 990 euro in 2020 would otherward only have right to a tax reduction of 25% instead of 30% and pension savers which in 2020 saved more than 1.260 euro, would have to transfer a limited amount (10 euro). This is avoided by the postponement. Also for the following tax years the maximum will amount to 990 euro.

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