New conditions in the application of the tax credit for the spouse

First, we would like to inform you that the tax credit of CZK 24,840 can only be claimed once a year, in the form of an annual tax settlement or tax return. This is not the case, for example, with the taxpayer credit, where the discount can be deducted monthly. If the spouse is entitled to a ZTP/P card, this amount is doubled, i.e. to CZK 49,680. A partner may be considered a spouse under the law governing registered partnerships.

Change in conditions since 2024

The current condition is that the spouses live in a jointly managed household and that the other spouse's own income does not exceed the annual limit of CZK 68,000. The spouse proves that the income does not exceed this limit by means of an affidavit in the tax return, which includes identification data.

Since the tax period of 2024, the amount of people who can use this tax credit will be limited. Another condition that the taxpayer must meet in order to be able to claim the deduction is that the spouses take care of a supported child who has not reached the age of 3.

How do we prove eligibility for this tax credit?

The employee proves the claim to the tax credit by submitting a document (copy) to the employer confirming the identity of the spouse and the existence of the marriage or registered partnership (proof of marriage or partnership). In addition, the employee must provide the ZTP/P card, if the spouse is entitled to use it, and, if applicable, the decision granting the card. The employee must also declare by 15 February that they share a household with a child under 3 years of age and that the income of the other spouse does not exceed the annual limit.

What do we include in the spouse´s income?

Instruction of the General Financial Directorate No. D-59 defines the spouse's own income as follows:

"The spouse's own income is represented by the sum of all own incomes earned in the tax period, not reduced by tax expenses (gross income), including income subject to withholding tax or tax-exempt income or income not subject to tax. However, income referred to in Section 3(4)(b) (loans or borrowings - note by Crowe) and income referred to in Section 35ba(1)(b) of the Income Tax Act shall not be taken into account."

Thus, we should be aware of which incomes are considered tax-exempt income and which are not subject to tax. Do not forget to include them in the limit in question, although, from the point of view of personal income tax, the spouse will not deal with them in their personal income tax return.

A list of incomes from section 35ba(1)(b) of the Income Tax Act (hereinafter referred as “ITA”) which are not included in the own income is set out below:

• state social support benefits,
• foster care benefits, except for the foster parent's remuneration,
• benefits for persons with disabilities,
• benefits of assistance in material distress,
• case allowance,
• social services,
• state contributions to supplementary pension schemes with state contribution,
• state contributions to supplementary pension savings,
• state contributions according to the Act on Building Savings and on State Support for Building Savings,
• scholarships granted to students continuously preparing for a future profession and
• income arising from the care of a relative or other person entitled to a care allowance under the Social Services Act, which is exempt from tax under Section 4 of the ITA.

The benefits of state social assistance referred to in the first point above cover the following:

• income-related benefits
  • child benefit,
  • housing benefit,
  • childbirth allowance,
• other benefits
  • parental allowance,
  • funeral allowance.

It follows from the above that, on the contrary, the following incomes are included in the spouse's own income:

• maternity allowance paid during the support period (benefit period),
• unemployment benefit,
• sickness benefits paid,
• wage compensation in case of temporary incapacity for work,
• all pensions granted under the Pension Insurance Act.

In which tax period does the income fall?

The taxable period of personal income tax is determined as a calendar year, i.e. from 1 January to 31 December. The spouse's income falls within the tax period in which the income is paid, i.e. when the spouse actually receives it.

In the case of employment income, a different rule applies. If the spouse receives this income within 31 days after the end of that tax period, it is considered income paid or received in that tax period. For example, if a spouse receives a payment from his employer for the period of December 2024 to 31 January 2025, this income is still treated as income of 2024.

Alimony

If parents do not take care of a dependent child in a joint household, the obligation to provide alimony arises for the parent who does not have custody of the child. The amount is determined by the court, or the court approves the amount agreed between the parents. Alimony is intended to be the child's income and thus is not included in the spouse's own income. However, if the spouse receives an amount higher than the alimony determined as per above, this excess amount shall be included in their own income.

Property held in the community of property of the spouses

In the case of spouses who have property held in joint (common) ownership, the spouse's own income does not include income:

• which is allocated to the other spouse (e.g. in the form of rent from a property which has been transferred from the joint ownership to the other spouse's business property, resulting in income, e.g. in the form of rental income taxed by that other spouse), or

• is treated as income of the other spouse for income tax purposes (e.g. rental income or income from the sale of property in the joint ownership which is not included in the business property is taxable under the ITA only by one of the spouses).