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

The couple, Mr. AHG and Mrs. 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 earned income, excluding exempt income, greater than 8,000 euros per year, nor has he filed a IRPF declaration.

Determine the amount of the personal and family minimum for both spouses under the individual tax regime and under the 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 Legal Provisions on taxes ceded by the State, approved by Legislative Decree 1/2010, of October 21, minimum amounts for descendants in substitution of those established in article 58 of the Law of Personal Income Tax 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 child and subsequent ones determine different amounts that will have to be applied to calculate the regional tax.

Individual taxation of the husband:

State minimum			Regional 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 years) (50% s/4,000)	2,000		Child 3 (1 years 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 by descendants	5.950		Minimum total by descendants	6.150
Minimum personal and family total		11,500	Minimum personal and family total		11,700

Individual taxation of women

State minimum			Regional 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 years) (50% s/4,000)	2,000		Child 3 (1 years) (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 by descendants	5.950		Minimum total by descendants	6.150
Minimum personal and family total		11,500	Minimum personal and family total		11,700

Joint taxation of the family unit⁽²⁾

State minimum			Regional 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 years) (50% s/4,000)	4.000		Child 3 (1 years) (50% s/4,000)	4.400
	Youngest son 3 years old	2.800		Youngest son 3 years old	2.800
	Minimum total by descendants	11.900		Minimum total by 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 child and subsequent children.^(Back)

⁽²⁾The minimum for the taxpayer under article 57 of the Personal Income Tax Law is in any case 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 taxable 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 savings .^(Back)