Tax incentives

Basic exemption, housing loan interest, training expenses, donations, and contributions to supplementary funded pension are allowed to be deducted from the person’s total income.

The following can be deducted from taxable income:

  • contributions to a mandatory funded pension and unemployment insurance premiums – accounted for during the year, excl. sole proprietors’ contributions to a mandatory funded pension;
  • contributions to a voluntary funded pension – deduction limit of 15% is applied, but no more than 6,000 euros of tax-free income per year;
  • mandatory foreign social security contributions;
  • increased basic exemption for spouse (if the spouse’s annual income is less than 2,160 euros and if the spouses’ total annual income does not exceed 50,400 euros) is 2160 euros and the spouse’s annual income difference;
  • increased basic exemption upon provision of maintenance to child – the amount is 1,848 euros for the second child and 3,048 euros starting from the third child. Increased basic exemption is not reduced if the child receives a survivor’s pension or a national pension upon loss of a provider;
  • increased basic exemption of up to 5,000 euros from the income derived from the sale of timber felled from an immovable belonging to a forest owner and the transfer of the right to cut the standing crop growing there as well as Natura 2000 support for private forest land after the deductions related to forest management have been made;
  • housing loan interests on loans taken for the purchase of a home – in the amount of 300 euros;
  • training expenses;
  • gifts, donations.

Housing loan interests, training expenses, gifts and donations can be deducted from the income in an extent of up to 1,200 euros. Deductions cannot exceed 50% of the taxpayer’s taxable income in Estonia for the same period of taxation.

Deductions from taxable income include:

  • basic exemption – up to 6000 euros per calendar year depending on income size;
  • increased basic exemption in case of minor children – 1848 euros per calendar year for each child up to 17 years of age beginning from second child;

    Starting from 2020 (the 2020 income tax return, filed by 30 April 2021), the additional tax-free income will be 1848 euros for the second child and 3048 euros starting from the third child. From 2020, the additional tax-free income will not be reduced if the child receives the survivor's pension or the national pension in the case of the loss of the provider.
  • housing loan interest – up to 300 euros per year;
  • training expenses;
  • gifts, donations;
  • contributions to voluntary funded pension – limitation on deductions of 15 per cent is applied, but not exceeding 6000 euros;
  • contributions to a mandatory funded pension and unemployment insurance (taken into account during a year, except contributions to a mandatory funded pension by sole proprietors);
  • social security payments mandatory in a foreign state.

A taxpayer may deduct the housing loan interest, training expenses, gifts and donations in the total amount of 1200 euros but not more than 50% of the taxpayer's income during the same period of taxation.

Deductions from taxable income include:

  • basic exemption – up to 6000 euros per calendar year depending on income size;
  • increased basic exemption in case of minor children – 1848 euros per calendar year for each child up to 17 years of age beginning from second child;
  • housing loan interest – up to 300 euros per year
  • training expenses;
  • gifts, donations;
  • contributions to voluntary funded pension – limitation on deductions of 15 per cent is applied, but not exceeding 6000 euros;
  • contributions to a mandatory funded pension and unemployment insurance (taken into account during a year, except contributions to a mandatory funded pension by sole proprietors);
  • social security payments mandatory in a foreign state.

A taxpayer may deduct the housing loan interest, training expenses, gifts and donations in the total amount of 1920 euros but not more than 50% of the taxpayer's income during the same period of taxation.

If, upon withholding income tax, the tax incentives have been fully taken into account, submission of an income tax return is not required.

Calculation of basic exemption

The overall basic exemption applied on all types of income is up to 6000 euros per year, i.e. up to 500 euros per month.

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Housing loan interest

A person has the right to deduct interest payments for a loan taken for acquiring a house or apartment for himself or herself. The loan or finance lease interest payments made upon acquisition of only one house or apartment may be deducted from the taxable income at any one time.

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Training expenses

A taxpayer may deduct from his or her taxable income the training expenses paid during the calendar year which incurred to this taxpayer and a child of under 26 years of age, grandchild, brother or sister, or, if no such training expenses were incurred, the training expenses of the permanent resident of Estonia of less than 26 years of age.

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Gifts and donations

Certified gifts and donations can be deducted from the income, if these are made to the person entered into the list of non-profit associations, foundations and religious associations benefiting from income tax incentives that shall be approved by a resolution of the Tax and Customs Board.

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Sharing tax incentives

Spouses cannot submit a traditional joint income tax return any more. However, there is a possibility to transfer one’s unused tax incentives into the spouse’s tax return.

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Last updated: 10.09.2021

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