Very few winners
“For all retirees who are at the start of the tax scale […]their taxation will drop, ”said the Minister of the Economy Eric Lombard on Tuesday. But these possibilities for lower taxes will focus on young retirees (under 65) whose pensions before abatements are between around 18,970 euros and 20,000 euros.
Indeed, below approximately 18,970 euros in declared income, before abatements and discussions, retirees alone are already subject to income tax.
Beyond 20,000 euros, the current reduction of 10 % on the amount of declared income mathematically represents a larger tax reduction potential than the 2,000 euros package offered by the government. Taxes on pensioners from retirees in this case will therefore increase.
As for retirees over 65, there will be no winners. The latter can indeed benefit from another special reduction, in general of 1,398 euros for retirees close to the tax threshold (at net income below 28,170 euros, according to the applicable ceiling this year). The over 65 taxables therefore already exceed the 20,000 euros mark declared annually from which the new proposed reduction of 2,000 euros is less attractive.
Finally, among the beneficiaries of the measure, the savings would be minimal, 4 euros per year for example for a retiree alone under 65 years old with 19,920 euros in annual income.
New taxable homes?
The government intends to renew next year identically the scales of this year’s income tax.
The new proposed reduction would however increase slightly (+ 0.5 %) the threshold from which retirees become taxable: today, it takes about 17,070 euros after reduction to be taxable (18,970 euros before the 10 %reduction), a threshold that would drop to 19,070 euros with the reduction of 2,000 euros.
But the taxes of 2026 will be calculated on the revenues of 2025, the year when basic pensions will be revalued by 2.2 %, which should mechanically make retirees taxable which were not before.
For retirees over 65, the tax threshold would even be decreased, going from around 20,510 euros declared for a retiree alone to 20,460 euros, which should also increase the number of taxable retirees.
The fateful bar of 20,000 euros
From 20,000 euros declared, the increase in taxes would be more or less marked depending on the composition of the tax household. Where the current reduction of 10 % applied to the tax household as a whole, the reduction of 2,000 euros would apply for each member.
The maximum amount of abatement that will benefit from retirees, today set around 4,400 euros per tax household, would therefore vary from 2,000 euros for a retiree alone at 4,000 euros for a couple.
For example, a widowed retiree with 30,000 annual income benefited from 3,000 euros in reduction, and paid around 1,365 euros in taxes per year. With only 2,000 euros in reduction, he should pay around 1,525 euros in taxes per year.
At the maximum, the amounts of taxable income of a retiree alone can increase by 2,400 euros with the new abatement ceiling.
This represents a different tax overload depending on the level of income, because the rates are progressive. This amount can reach just over 1,080 euros per year for the richest retirees.
Couples of spared retirees
The new method of calculating the ceiling should relatively spare the couples of retirees, even the easiest.
The maximum reduction would drop from 4,400 euros to 4,000 euros, thus the increase in income taken into account in the calculation of taxes would be limited to 400 euros.
This amount corresponds to a maximum tax overload of 180 euros per year, an amount which would only be reached by highly affluent retirees, whose income would largely exceed the last income section of the scale (around 180,300 euros per year).
