Many of you will have thought about home renovation over the past year, but have put it off until further into the future. Now the year is drawing to a close and many people are already thinking about Christmas. Nevertheless, now is one of the best times to renovate. Why do it at the turn of the year, in the middle of all the festivities? This is because at the turn of the year, the household allowance can be as high as €11 500. Yes, you read that correctly.
The household allowance in a nutshell
The household allowance is a tax relief for all persons who carry out services in their home that are subject to the tax deduction. This is the government’s way of supporting domestic employment and entrepreneurship while at the same time fighting the grey economy. The deduction is primarily from tax on earned income and capital income. In other words, when you take advantage of the household allowance, you save money by paying less tax. You can get a deduction for work done at home, in a leisure apartment or in your parents’ home. You do not have to own a home to qualify for the deduction and several people can claim the deduction for the same service. You can read more about this in our guide to the household allowance.
Amount of the household allowance in 2021 and 2022
In 2021, the maximum amount of the household allowance will be €2 250 per person. The deduction for the VAT part of the work is 40% and the excess is €100. In 2022, the reduction will be up to €3,500 per person per year for renovation services that do not use oil heating and for domestic, care and nursing work. The reduction in the labour share of these services is 60%, which will further increase savings. For other renovation work, the deduction remains unchanged, i.e. up to €2 250 per person. The deduction is for the labour portion of the bill. In other words, you cannot get a household allowance for things like supplies used for work or travel expenses.
Double household allowance for couples
As the maximum household allowance is €2 250 – €3 500 per person, depending on the service, a couple can receive a household allowance of up to €5 500 – €7 000. This is the most common way to get a lot more deductions in the same household. But there is another way to “double” the household allowance once more, and get a staggering €11 500 deduction.
Household tax credit can be quadrupled at the turn of the year
The household allowance is granted for the calendar years for which you have paid the business invoice. So if a major project is scheduled at the turn of the year and is invoiced in two separate instalments, with the first instalment being paid in 2021 and the second in 2022, you can use the household deductions for two different years for the same project. This means that a single person can receive a maximum of €5,750 in deductions, while a couple can receive deductions of up to €11,500. The amount will be reduced by an additional €100 for both years for each person, up to a maximum of €400. It is still a very big saving.
Sounds too good to be true – is there something fishy about it? No, it is not. The tax administration itself says so on its website: “If, for example, a renovation takes place at the turn of the year, you can take advantage of the household deduction according to the invoices paid in two different tax years.”
However, it should be noted that the doubling should not be artificially spread over two years. The service must be genuinely timed to the end of the year and the provider must not deviate from the normal billing conditions. Nor can you “double down” on a renovation financed by a loan. For more detailed instructions on the household tax credit, please visit the website of the Tax Administration.
How should you use the household allowance?
Did you know that statistics show that there are more than 100 water damage incidents a day in Finland? This is partly due to the fact that many private houses have old plumbing systems and plumbing repairs are not carried out in time. We renovate the plumbing in private houses and carry out free condition surveys to help you determine the need for renovation. So now in particular is a good time to have your home’s plumbing inspected free of charge.
Applying for the household allowance is easy if you have ordered the work from Taloturva. Taloturva is in the pre-tax register, which is a prerequisite for receiving the household tax credit. We will provide you with guidance on how to apply for the deduction and send you a pre-filled application form. All you have to do is complete the form and send it to the tax authorities.
