HOW IT WORKS
Tax Dependent: What are the Benefits?
Who Qualifies as a Tax Dependent?
Before discussing the benefits of enrolling tax-dependent family members, let’s clarify some points.
According to Article 12 of TUIR (Consolidated Income Tax Law), all family members with a total gross income below €2,840.51 are considered TAX DEPENDENTS.
NOTE: For children under 24 years of age, the limit is €4,000
Therefore, the following are considered tax dependents:
- spouse with income below €2,840.51;
- children over 24 years of age with income below €2,840.51;
- children under 24 years of age with income below €4,000.
Can I enroll a Tax Dependent in Fondapi?
Yes. Absolutely yes!
Moreover, the contributions I make to their account are fully tax-deductible up to the annual limit of €5,164.57.
It’s important to remember that all contributions you make to Fondapi are tax-deductible up to the aforementioned limit, and this calculation includes all contributions made to Fondapi, including those for tax dependents, excluding only TFR amounts. The deductibility limit is fixed, so a worker who enrolls a tax dependent can deduct €5,164 and not €5,164+€5,164 for each tax dependent enrolled in Fondapi.
But why open an account for a tax dependent family member?
Simple!
Besides the already mentioned tax benefits, membership – especially for young people – allows the account holder to:
- Build their own pension savings for the future (increased by returns);
- Start accumulating contribution seniority in supplementary pension schemes immediately.
And contribution seniority is the key factor. As we know, subject to the conditions that allowed you to join Fondapi, contributions made to supplementary pension schemes are temporarily restricted and cannot be freely accessed except in very rare and urgent cases.
For other situations, the minimum waiting period before partially accessing accumulated funds is 8 years.
Additionally, for certain types of settlements, the longer you participate in supplementary pension schemes, the lower the taxation on contributions becomes (after 35 years of participation, for example, it reaches a minimum of 9%).
Therefore, the sooner you join supplementary pension schemes, the sooner you acquire certain rights: don't waste time!
Finally, don’t forget that tax dependent family members’ savings are also invested and generate returns. These returns, after tax, are much more advantageous than other forms of investment.
An Example
So far, we’ve seen theoretically what the benefits are of enrolling a tax dependent family member. Now, let’s look at it from a more practical perspective!
Luca, born in 2020, was enrolled in Fondapi right away. Every month, his parents contributed part of their savings to his position.
In 2038, upon turning 18, Luca decides to withdraw a small amount for the study abroad program he has been planning for several months.
In 2043, now twenty-five and newly graduated, he has just signed his first employment contract and decided to join the pension fund identified by his company; he therefore transfers his position from Fondapi to the new Pension Fund free of charge.
Five years later, together with his girlfriend, he decides to buy a house but needs money for the down payment. Since he has been enrolled in supplementary pension schemes for more than 8 years, he can request an advance of up to 75% for purchasing his first home.
Still Have Questions?
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