Czech employees are facing challenges in navigating the documentation required for tax reductions as changes in tax laws, part of the government’s consolidation package, may have led to confusion. The modifications have implications for the annual tax settlement, particularly regarding nursery school fees and spouse deductions.

Under the altered regulations, nursery school fees and spouse deductions can only be claimed for the last time in the annual tax settlement for the previous year. To claim nursery school fees, employees must provide confirmation from the nursery school, and for spouse deductions, a declaration of honor is necessary, as explained by Gabriela Ivanco, a tax advisor at Mazars.

In the upcoming tax settlement for the year 2024, to be submitted next year, spouse deductions can only be claimed if the spouses are caring for a child younger than three years. Additionally, there is a tax deduction of up to 17,300 crowns for each child attending preschool facilities, and the spouse deduction can amount to up to 24,840 crowns.

For severely disabled individuals requiring a guide (ZTP/P certificate), the deduction can be as high as 49,680 crowns. There is an income limit of 68,000 crowns per year for the spouse deduction, encompassing income from various sources like employment, maternity benefits, sickness benefits, pensions, or unemployment support. However, it excludes parental and state social support benefits, material distress aid, or scholarships.

Beyond these deductions, additional deductible items are subtracted from the base used to calculate tax. Contributions to pension insurance, supplementary pension savings, life insurance, and mortgage and housing loan interests can also be claimed, with specific limits set, such as up to 24,000 crowns for pension-related contributions and up to 300,000 crowns for mortgage and housing loan interests depending on the date of property acquisition.

As employees navigate these changes, tax advisors play a crucial role in guiding them through the updated regulations and ensuring accurate documentation submission to optimize tax benefits within the new framework.

Article by Prague Forum