Income tax declarations started last week and as usual digital queues formed on the first day. But this may soon become a thing of the past as the state will end three exemptions next year.

Luminor Estonia's Chief Economist Lenno Uusküla told "Aktuaalne kaamera": "One is that interest on mortgages is no longer recoverable. The second is the spousal refund, if income falls below a certain limit or the spouse did not earn an income. And the third, which is likely to have the biggest impact, is the income tax refund on children, which was €1,848 for the second child and €3,000 for the third. There are in fact significant amounts that were recovered and these amounts can no longer be relied on."

Deputy Director General of the Tax and Customs Board (MTA) Raili Roosimaa said the child tax refund will have the biggest effect. It currently costs the state around €170 million.

These changes affect around 190,000 people.

"According to statistics from recent years, around 770,000-780,000 declarations are made. Broadly speaking, the vast majority remain will not be affected," said Roosimaa.

It will still be possible to deduct training costs and donations of up to €1,200. The income tax refund also applies to the second and third pension pillars.

"From the new year, it will also be possible to increase contributions to the second pillar tax-free. From 2 percent to 4-6 percent. Around 100,000 people will have made contributions to the third pillar in 2023, an increase of 20 percent," Roosimaa said.

From next year, the income tax rate will also increase and the tax hump will be removed, which means that the need to forecast your income will disappear.

"It will only apply from the beginning of 2025 and the employer should make a declaration then. Employers themselves may also organize the collection of applications earlier, but by the end of December at the latest, employers should also have these applications in hand," Roosimaa said.

The MTA said, with the new changes, people may no longer rush to submit their declarations online.

"We will see that if these exemptions also disappear, /---/ it will take the pressure off from the first days. The motivation to file a return will probably be slightly reduced," Roosimaa said.

However, overall, taxes are rising.

Luminor's Uusküla said: "These amounts have been fixed in euros, which means that the income tax rebate is an increasingly smaller share of the total pot of public spending. The total tax burden is thus actually increasing every year in a hidden way."

Submission of income tax returns started on February 15 and the deadline is April 30. 

--

Follow ERR News on Facebook and Twitter and never miss an update!