Example 5. Marriage with common children residing in the Community of Madrid

The couple made up of Don AHG and Dona PLC, aged 40 and 38, respectively, have three children with whom they live. The oldest is 6 years old, the second is 4 years old and the third is 1 year old. None of the children has obtained income, excluding exempt income, of more than 8,000 euros per year nor has they filed a tax return Personal Income Tax

Determine the amount of the personal and family minimum for both spouses under individual taxation and joint taxation of the family unit for the purposes of calculating the state tax and the regional tax.

Solution:

Previous note:The Community of Madrid has established in article 2 of its Consolidated Text of the Legal Provisions regarding taxes transferred by the State, approved by Legislative Decree 1/2010, of October 21, minimum amounts for descendants to replace those established in article 58 of the Personal Income Tax Law However, it must be taken into account that the minimums for the first and second child coincide with those established in the aforementioned article 58. Those relating to the third and fourth children and subsequent children do determine different amounts that will have to be applied to calculate the regional tax.

1. Husband's individual taxation:

   State minimum			Autonomous minimum
   Taxpayer tax-free threshold		5,500	Taxpayer tax-free threshold		5,550
   Allowance for descendants	Child 1 (6 years old) (50% s/2,400)	1,200	Allowance for descendants	Child 1 (6 years old) (50% s/2,400)	1,200
   	Child 2 (4 years old) (50% s/2,700)	1,350		Child 2 (4 years old) (50% s/2,700)	1,350
   	Child 3 (1 year old) (50% s/4,000)	2,000		Child 3 (1 year old) (50% s/4,000) (1)	2,200
   	Minor child 3 years old (50% s/2,800)	1,400		Minor child 3 years old (50% s/2,800)	1,400
   	Minimum total for descendants	5,950		Minimum total for descendants	6,150
   Minimum personal and family total		11,500	Minimum personal and family total		11,700

2. Individual taxation of women

   State minimum			Autonomous minimum
   Taxpayer tax-free threshold		5,550	Taxpayer tax-free threshold		5,550
   Allowance for descendants	Child 1 (6 years old) (50% s/2,400)	1,200	Allowance for descendants	Child 1 (6 years old) (50% s/2,400)	1,200
   	Child 2 (4 years old) (50% s/2,700)	1,350		Child 2 (4 years old) (50% s/2,700)	1,350
   	Child 3 (1 year old) (50% s/4,000)	2,000		Child 3 (1 year old) (50% s/4,000)	2,200
   	Minor child 3 years old (50% s/2,800)	1,400		Minor child 3 years old (50% s/2,800)	1,400
   	Minimum total for descendants	5,950		Minimum total for descendants	6,150
   Minimum personal and family total		11,500	Minimum personal and family total		11,700

3. Joint taxation of the family unit⁽²⁾

   State minimum			Autonomous minimum
   Taxpayer tax-free threshold		5,550	Taxpayer tax-free threshold		5,550
   Allowance for descendants	Child 1 (6 years old) (50% s/2,400)	2,400	Allowance for descendants	Child 1 (6 years old) (50% s/2,400)	2,400
   	Child 2 (4 years old) (50% s/2,700)	2,700		Child 2 (4 years old) (50% s/2,700)	2,700
   	Child 3 (1 year old) (50% s/4,000)	4,000		Child 3 (1 year old) (50% s/4,000)	4,400
   	Youngest child 3 years old	2,800		Youngest child 3 years old	2,800
   	Minimum total for descendants	11,900		Minimum total for descendants	12,300
   Minimum personal and family total		17,450	Minimum personal and family total		17,850

Notes to the example:

⁽¹⁾In determining the minimum for descendants, the amount approved by the Community of Madrid has been applied, which modifies the amount corresponding to the third and subsequent children.^(Back)

⁽²⁾The minimum taxpayer in article 57 of the Personal Income Tax Law is in all cases 5,550 euros per year regardless of the number of members in the family unit. However, in the joint taxation of the family unit the tax base can be reduced by 3,400 euros per year, prior to the legally established reductions. See, in this regard, Chapter 13 above, which discusses the reductions in the general tax base and of savings .^(Back)