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 the 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 should be noted that the minimum amounts for the first and second child coincide with those set out 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.
1. Individual taxation of Mr. AHG:
|
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 year) (50% s/4,000) | 2,000 | Child 3 (1 year) (50% s/4,400) (1) | 2,200 | ||
| Child under 3 years old (50% s/2,800) | 1,400 | Child under 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 | ||
2. Individual taxation of Mrs. PLC:
|
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/4,400) | 2,200 | ||
| Child under 3 years old (50% s/2,800) | 1,400 | Child under 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 | ||
3. Taxation joint 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) | 2,400 |
Allowance for descendants |
Child 1 (6 years old) | 2,400 |
| Son 2 (4 years old) | 2,700 | Son 2 (4 years old) | 2,700 | ||
| Son 3 (1 years old) | 4.000 | Son 3 (1 years old) | 4.400 | ||
| Child under 3 years old | 2.800 | Child under 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)