It is estimated that parents spend up to 150,000 euros on a child until he or she reaches adulthood. However, many people don't realize that significant tax benefits can be achieved with a smart financial strategy. Although child benefit and deductibility of care expenses provide some relief, parents can save much more by transferring assets to their children. This is reported by “Wirtschaftswoche”.
Wealth transfer as a key to tax savings
While parents have to pay a withholding tax of 26.4 percent on capital gains above the saver's fixed rate, children can earn up to 12,640 euros a year tax-free. If assets are transferred correctly, parents can save up to €3,337 per child per year; From 18 years old, this represents a saving of around 60,000 euros.
The Legal Route to Tax-Free Capital Gains for Children
Wealthy parents could, for example, give their child a €250,000 stock portfolio when he or she is born without having to worry about gift tax. With an assumed dividend yield of four percent, the resulting income is tax-free to the child if there is no other income. To avoid withholding at source, it makes sense to apply to the tax office for a non-assessment certificate.
Compliance with the limits of the social security law
However, there are limits: if the child has compulsory health insurance and earns a regular income of more than 505 euros per month, he or she is no longer entitled to non-contributory family insurance. Additionally, a child's high level of personal wealth can have a negative impact on his or her eligibility for student loans.
Advice for less wealthy parents
In addition, of course, not all parents are in a position to give 250,000 euros to their child at birth. But less wealthy mothers and fathers can save money, too. Wirtschaftswoche magazine recommends that working parents include an allowance for childcare costs in the next salary negotiation instead of a normal salary increase. After all, such a subsidy is free of taxes and social security for children who are not yet of school age. There is no upper limit.
With the subsidy, parents can save on childcare or daycare costs, as well as food costs.
This text was created with the help of a machine.