Saving taxes in Finland is relatively easy the closer the year turns to its end. All you need to do is to go through the list of tips below every year. Don’t let this year pass by before you have verified what you can do to save taxes in Finland!
1 Check your tax card
For different reasons your tax card might not be up to date for the last salary this year.
Maybe your salary has increased, and you will hit the ceiling on your tax card. In that case you will unfortunately be taxed according to the higher additional rate of your tax card. Obviously, you will receive the money back when filing the tax return, but this can take almost a year. Therefore raise the ceiling on your tax card.
If on the other hand your salary is much lower than your tax card ceiling, you have already paid too many taxes throughout the year. In the best case you are even entitled to skip paying taxes in Finland on your last salary, provided you give your employer a revised tax card stating so. Accordingly lower the ceiling on your tax card.
Important: Make sure the ceiling on your tax card approximately matches the expected salary of the year ending. If it doesn’t yet, apply for a revised tax card in MyTax as long as you can. Please find more infos on common mistakes with the tax card in this post.
2 Utilize capital losses
If you have made capital losses you are entitled to utilize them in taxation against capital gains. For example if you have a 800 euro capital loss and a 1 000 euro capital gain in the same year, you need to pay capital gain tax only on the net capital gain of 200 euro, not on the total. In other words capital losses are deductible from capital gains in taxation.
Let’s think that one step further. Accordingly if you have already generated capital gains this year and happen to hold shares currently at loss, you can consider selling said shares to realize some of the losses, in order to pay less taxes. In that case make sure to sell the unprofitable shares before the year end.
Another important thing is that capital losses can be utilized against capital gains generated in the same year or if such gains don’t exist, against gains in the following 5 years. Therefore always make sure to use aging capital losses in time. You can see the balance of unutilized capital losses with their due year in your tax return.
Example: You have an unutilized capital loss from 2017. It will fall due at the end of 2022 if not utilized. So if you have the possibility to generate capital gains to utilize the loss before the end of 2022 you should do that.
However, so-called small capital losses are not deductible. The definition of a small loss is that the sales price of all sold shares, ETF’s, etc. in a tax year is less than 1 000 euros. Please note the amount concerns the combined sales price, not the combined loss. Accordingly there is a tax rule also for so-called small capital gains (see next chapter).
3 Small capital gains don’t trigger taxes in Finland
Capital gains are tax-free if the sales price of all sold shares, ETF’s, etc. in a tax year is less than 1 000 euros. Please note the amount concerns the total sales price, not the total gain.
Example: You have not sold any shares, ETF’s, etc. during the year. On December 31st you hold shares worth 5 000 euros, which you purchased for half the price in 2020. If you sell less than a fifth of them (sales price less than 1 000 euros excuding fees) and nothing else before the year ends, the gain will be tax-free.
4 Ensure your maximum tax credit for household expenses
The tax credit for household expenses depends on when you actually paid the expenses. For example a bill for the 2022 X-mas cleaning paid only in 2023 will affect taxation of 2023. If you have already reached the maximum of accepted costs for the tax credit of 2022 (2 250 euro for home repair, 3 500 for household work and nursing per person) you should let your partner pay the remaining bills this year or then arrange payment in the following year.
5 Organize your expenses for production of income wisely
Have you bought professional literature or do you have other expenses for the production of income? Note that also for them the year of payment is relevant, not the year on the bill’s date.
Remember that you can benefit from these expenses only if they exceed the 750 euro threshold everyone receives automatically. For this reason it can make sense to concentrate the expenses in one year.
6 Administrative actions with effects on taxes in Finland
Certain administrative decisions can have a tax consequence for the following year if handled before the old year ends. If you f.ex. move from one municipality to another over the year end, you will pay municipal tax according to your home municipality on December 31st.
Also elegibility for church tax depends on whether one is a member of the church on December 31st of the previous year. Rates vary between 1% and 2.1%, depending on the parish concerned.