Asked about France 2, the Minister of the Economy confirmed the abolition of the automatic reduction of 10% from which retirees benefit, for the benefit of a more targeted system.
Change of course for the taxation of French retirees. From 2026, the current 10% reduction for professional costs, automatically applied to pensions to reduce the taxable tax base to income tax, will be replaced by a fixed package of 2000 euros per year.
“We will transform the deduction of 10% of income into a deduction of 2000 euros for everyone”announced on Tuesday the Minister of the Economy, Éric Lombard, on France 2. He thus confirmed the announcements made during the press conference of François Bayrou: “The benefits for professional expenses are not justified for all households”had estimated the Prime Minister, determined to track down “Useless, ineffective tax niches”.
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This reform, described as “Social justice measure” by the government, hears “Advantage small pensions, guarantee an unchanged purchasing power to average pensions and put the most important pensions back into ordinary law”in the words of the Prime Minister, François Bayrou. “We will make the difference between homes that need help or whose income deserves to be attached to it and those above capacity”said the head of government.
Target the tax effort more
Concretely, for “All retirees who are at the start of the tax scale (…), their taxation will drop”explained Éric Lombard. “In compensation, the taxation of retirees which earn more than 20,000 euros per year will be slightly increased”. This change would come even though that pensions would be frozen in 2026, that is to say not indexed to inflation, as the tenant of Matignon also offered it on Tuesday.
Applicable to nearly 14.9 million households, the former abatement represented one of the most expensive French tax niches, weighing nearly 5 billion euros each year in the state budget. By going from a percentage linked to the amount of the pension (with a ceiling of 4,123 euros) to a fixed amount, the government intends to target the tax effort more.