perusvähennystä

Perusvähennys, commonly translated as basic deduction, is a standard deduction in the Finnish personal income tax system. It reduces the portion of earned income that is subject to tax. The deduction applies to most earned income, such as wages and salaries, and to some forms of earned self-employment income, while capital income and passive income are typically not eligible.

The amount of perusvähennys is determined by the Finnish Tax Administration for each tax year and depends on the level of earned income. The exact figure is published in official tax guidance and appears on the taxpayer’s tax card and tax decision. Because the deduction is calculated automatically, most taxpayers do not need to apply for it separately; changes can be requested by updating the tax card or filing an amended tax return if necessary.

Impact: By lowering the taxable earned income, perusvähennys reduces income tax liability and can influence the amount of social benefits calculated from income. It functions as one element among several deductions intended to simplify taxation for residents with earnings.

Relationship to other deductions: Perusvähennys is one of several deductions in Finland’s tax system. It is distinct from deductions related to personal circumstances (such as family-based deductions) and from deductions applicable to capital income.

History and purpose: The concept was introduced to provide automatic tax relief for workers and to streamline the calculation of taxes. It contributes to the overall structure of progressive taxation by offering relief that is proportionate to earned income.