Tax credits and deductions: how to reduce income tax to the minimum?

Do you file your own personal tax returns? You can save significantly on income tax by claiming allowances and deductions correctly. We explain the difference between discounts and deductions, how you can claim them and what you need to document.

The difference between tax deductions and tax credits

Tax credits and deductions are tools that help reduce income tax, but each works differently.

What makes them different?

You can combine the two when you settle your bill to get the maximum tax benefit. After deducting tax credits from your tax base, you can work out your income tax as a guide. You can then reduce this by claiming tax credits.

Tax credits and deductions can be claimed by all individuals and self-employed persons. As a self-employed person in the flat-rate tax scheme, you do not claim these benefits because you do not file a tax return, except in the following 5 situations.

What tax deductions can you claim in 2025?

Tax deductions can be taken by both the self-employed and the employee. We've summarised all the tax-supported items for 2025 in a table. For each, you'll find the maximum amounts you can deduct from your taxable amount, the conditions for claiming them and what you need to document.

From 2024, a new common limit of CZK 48,000 per year applies for tax-supported retirement savings products, which include:

• Life insurance - if it contains a savings component, such as investment, endowment or pension insurance.
• Long-term care insurance - for illness or loss of independence.
• Long-term investment product (LTIP) - for example, investments in stocks, bonds, mutual funds or conservative savings in deposit accounts.
• Pension savings - includes superannuation and supplementary pension savings.

In the case of supplementary pension insurance, only the part of contributions that exceeds a set limit is included in the deduction - until 30 June 2024, the part above CZK 1,000 per month is deducted, from 1 July 2024 above CZK 1,700 per month.

How do the deductible items of a self-employed person work?

In addition to tax-free deductions, as a self-employed person you can also reduce your tax base by using deductible items if you keep tax records or accounts.

What can be deducted?

• Tax losses reported in previous years.
• Training costs, such as funding student and apprentice work experience.

What tax credits can you deduct in 2025?

As well as deductions, tax credits can be claimed by taxpayers who have income from a business or employment. Below you will find an overview of them and the conditions for claiming them.

If you qualify for a deduction during the year, you will only claim a pro rata portion of the deduction based on the corresponding number of months. For example, if your child is born in September, you will be entitled to child benefit for the 4 months remaining in the year.

In 2024, the student tax credit and nursery tax credit were abolished, but the other credits remain in place.

How to apply tax discounts and deductions?

While employees apply the discounts at the payroll department, self-employed persons have to apply them themselves. However, both groups have one thing in common - if they miss the deadline for filing their tax returns or fail to submit the correct documents, they will not be able to claim the discounts.

The self-employed will claim them on their tax return

As a sole trader, you must claim all tax credits and deductions yourself on your tax return - this gives the tax office a summary of your business for the past year.

• In the return, you list your income, expenses, tax base and then deduct the non-taxable parts of the tax base and claim the discounts.
• The easiest way to do this is to complete and submit the form via the My Taxes portal, including attachments to support your entitlement to deductions and allowances.
• The last step after submitting the tax form is to pay the calculated tax to the correct account with the correct variable and constant symbol.

Employees ask their employer

• Sign the Income Taxpayer Declaration

When you start work and then at the start of each year, you sign a 'pink form' - the Personal Income Tax Payer's Declaration of Employment Tax - where you put a cross next to the tax credits you are entitled to (for example, the taxpayer's allowance). Your employer then takes these allowances into account each month when calculating your net pay.

• Applying for an annual tax return

If you want to reduce your tax by interest paid on loans or retirement savings contributions, ask your employer for an annual tax clearance. Submit your application together with a receipt for the amounts paid by 15 February at the latest. Your employer will make an accounting and reimburse any overpayment in your March pay.

Are you confused about tax credits and deductions?

By applying tax credits and deductions appropriately, you can save thousands of crowns a year. Not sure what all can reduce your income tax? Leave the whole tax return to the experts. Contact us using the form below and together we'll find a way to help you.