Are you moving to Madrid and wondering how much income tax you’ll have to pay? Well, the answer is not that simple as it depends on several factors such as your income level, residency status, and tax deductions. Let’s dive into the details and understand the income tax system in Madrid.
Residency Status
Your residency status determines how much income tax you’ll have to pay. If you’re a resident of Madrid, you’ll be taxed on your worldwide income. On the other hand, if you’re a non-resident, you’ll only be taxed on your Spanish income.
Income Tax Rates
The income tax rates in Madrid are progressive, which means that higher-income earners pay a higher percentage of their income in taxes. There are currently five tax brackets ranging from 9% to 47%. Here’s a breakdown of the current tax rates:
- Up to €12,450: 9%
- €12,450 – €20,200: 12%
- €20,200 – €35,200: 15%
- €35,200 – €60,000: 21%
- Above €60,000: 47%
It’s important to note that these rates are subject to change each year based on government policies.
Tax Deductions
There are several deductions available that can lower your taxable income and reduce the amount of taxes owed. Some common deductions include:
- Social Security contributions: You can deduct up to €4,070 per year if you’re paying into the Spanish Social Security system.
- Pension contributions: If you’re making contributions to a private pension plan, you can deduct up to 30% of your income or €8,000, whichever is lower.
- Charitable donations: Donations made to registered charities can be deducted up to a certain percentage of your income.
Conclusion
In conclusion, the amount of income tax you’ll have to pay in Madrid depends on various factors such as your income level, residency status, and tax deductions. It’s always advisable to consult with a professional tax advisor who can guide you through the process and help you maximize your deductions while minimizing your tax liability.
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