Faced with inflation, the purchasing power of households is significantly reduced. However, there is good news for 2024 and it should allow half of the French to save money next year.
This is one of the rare good news brought by inflation, which according to INSEE should amount to 4.8 percent for the whole year. Right behind this number is good news for almost every other French person.
In order to fully understand the full scope of this measure, it is first necessary to look at what the income tax scale is. Indeed, every year taxpayers pay tax on the income collected in the previous year: the tax for 2024 is therefore based on the income (wages, pensions, annuities, etc.) received in 2023. But it is necessary to subtract a certain number of tax deductions from the obtained sum, then divide the obtained the amount with the number of family quotient shares.
All this calculation gives what the Directorate General for Public Finance (DGFIP) calls “net taxable income”, to which the income tax scale is applied, made up of 5 classes that all correspond to different tax rates.
However, in 2022, while inflation related to the economic recovery after the covid-19 pandemic and the war in Ukraine led to an average price increase of 5.4%, the government decided to revalue it to the same level. Income tax scale. A decision that the public authorities decided to renew this year. Specifically, as in 2022, this measure will lead to a reduction in income tax for all taxpayers, i.e. about 40 million people, i.e. almost half of the French population.
In more detail, entry into the first tax bracket (11%) increases to EUR 11,294 compared to EUR 10,777 in 2023. The limit for the next bracket (30%) increases from EUR 27,478 to EUR 28,797. Entry into the higher tax bracket (41%) increases from EUR 78,570 to EUR 82,342. And finally, the threshold for the last tranche (45%) also increases from EUR 168,994 to EUR 177,106.
It is clear that only taxpayers who experienced an increase in income of more than 4.8% in 2023 will pay more taxes. But the increase will still be smaller compared to the situation in which the scale would not increase at all. Conversely, all tax households that experienced an income increase of less than 4.8%, did not receive a benefit increase or suffered a fall in income in 2023 will see a tax cut in 2024. The benefit is even greater for low-tax households which for some will even become tax-free.
For example, according to the DGFIP, “a single person with a stable taxable income of 30,000 euros will save 308 euros in 2024 compared to the previous year’s taxes”.