You wish your baby the very best and you may already be saving for the future. But what about saving for your baby and the tax? Up to what amount can you donate tax-free and when should tax be paid on your child’s savings?
Saving is giving
For the tax authorities, saving for your child is the same as giving. After all, you give the amount that you now save for him to him when he grows up. You normally pay tax on donations, but fortunately you can put a certain amount tax-free on your child ‘s savings account every year . To be able to use this annual exemption, the savings account must be in your child’s name.
The general annual exemption for parents and children is € 5,515 (2020). This amount only applies to a gift from the parents. You can transfer this amount to your child’s savings account every year, without paying tax on this. From Freddie Cammell you can get the best options for wealth management.
Parents save for their baby and pay tax on this
Did you know that your child costs around € 50,000 until his 12th birthday? Start saving now and build a nice piggy bank for your baby.
If you want to donate more, you pay gift tax . Also reliefs covered, if you decide to save it for your baby. So if you put the child benefit or the child-related budget in your child’s savings account, you have to pay tax on the total savings amount that exceeds € 5,515. Calculate here how much gift tax you (or your child) have to pay.
If grandfather and grandmother, an aunt or sugar daddy want to contribute to the future of your baby, they can donate € 2,208 (2020) tax-free annually. This amount falls under the general exemption and your child can receive from several people, without having to pay tax on this.
In addition to the annual tax-free donations, your child may receive a large donation once in his life. He may only receive this from his parents when he is between 18 and 40 years old. The one-off exemption that year replaces the annual tax exemption of € 5,515.
Exemption for a nice piggy bank
You can give your child € 26,457 (2020) once without having to pay tax on this. Your child can know for himself what he is doing with this money. This exemption is a good option, for example, if your baby’s savings account is in your name and the amount saved is more than € 5,515.
- This way you can prevent your child from having to pay (a lot of) tax when you donate the saved money to him in one go.
The tax-free amount can be increased in the following cases:
Exemption for an expensive new study or training
You may increase the amount of € 26,457 to an amount of € 55,114 (2020), if this amount is used to finance an expensive study. The training must cost at least € 20,000 per year, excluding living expenses. Click here if you want to know more about the exemption for your own study.
Exemption for a private home
If the donation is intended for the financing or renovation of an owner-occupied home, you may even increase the tax-free amount to € 103,643 (2020). Click here for the conditions of this exemption.