Perusvähennys

Perusvähennys is the basic deduction in Finland’s personal income tax system. It is a standard, automatically applied deduction that reduces the tax payable for earned income. The amount is determined by the Finnish Tax Administration for each tax year and is intended to acknowledge general work-related costs that arise from earning income.

The purpose of perusvähennys is to provide a baseline tax relief for all taxpayers with earned income, helping to balance the tax burden across different levels of earnings. It functions as a fixed deduction from earned income and is typically applied before calculating the final tax with the progressive tax rates. The exact value of the deduction varies by year and is published by the tax authority.

Application and eligibility: Perusvähennys is generally automatic for residents who have earned income. It does not apply to purely capital income, such as dividends or interest, or to certain pension income in different contexts. Taxpayers can see the effect of the deduction on their tax card (verokortti) and tax decision, and the amount is updated annually.

Relation to other deductions: Perusvähennys is separate from other deductions and credits, such as työtulovähennys (work-related deduction) and various general deductions. The interaction between these reductions determines the final tax payable.

In summary, perusvähennys provides a baseline reduction of tax for those with earned income, with a fixed annual amount set by the tax authority and applied automatically as part of the tax calculation.