How to Claim the Tax Benefit for Individuals Under 25?

From which incomes can you benefit?

The tax exemption for those under 25 applies to incomes included in the consolidated tax base. This covers wages and taxable social insurance benefits such as sick leave payments, infant care allowance, and childcare allowances. Additionally, it includes taxable social security benefits, remuneration paid to company executives, or any other taxable payments related to managerial duties.

Self-employed young people can also benefit from this exemption. This includes income calculated through simplified taxation (átalányadó), freelance earnings, earnings from independent activities, or even compensation from various engagements. Clearly, the possibilities are extensive.

Who is eligible?

The tax exemption applies to individuals under the age of 25 whose income falls within the consolidated tax base. Notably, students employed through student cooperatives are also eligible. However, if your income derives from property rentals, regular personal income tax rules will still apply.

Maximum amount of exemption

The exemption isn't unlimited. It applies up to a maximum monthly income, which in 2024 is set at 576,601 HUF. This represents the 15% personal income tax amount, which, annually, can exceed one million HUF in savings.

It's important to note that the exemption is valid only in months where the individual has not yet turned 25. Therefore, eligibility ends during the month of the individual's 25th birthday.

How to claim the exemption?

Good news! Generally, you don't have to do anything specific to claim this benefit, as your employer or payer is responsible for automatically applying it during eligible months. However, there's one exception: if you have income from multiple employers and your total income exceeds the exempt amount, you'll need to submit a declaration to partially or fully claim the exemption.

If you have two employers, neither of which individually exceeds the limit but collectively surpass it, you must provide an income tax advance declaration to both employers. This ensures proper allocation of the exemption, preventing incorrect taxation.

What about foreign young professionals?

In certain cases, foreign nationals working in Hungary can also benefit from this tax exemption. Besides the age requirement, it's crucial that at least 90% of the individual's total annual income is taxed in Hungary.

How to calculate exemption as a simplified taxpayer?

As a sole proprietor, naturally, your employer doesn't calculate your exemption. You must manage this yourself. In 2024, income calculated through simplified taxation is tax-free up to half the annual minimum wage—1,600,800 HUF. Beyond this, the exemption can be claimed up to a monthly income limit of 576,601 HUF.

Order of exemption with other tax reliefs

Several other tax reliefs could apply alongside the exemption for under-25s. These include tax exemptions for mothers raising four or more children, mothers under 30, personal allowances (due to health conditions like lactose intolerance, gluten intolerance, diabetes, or endometriosis), first-marriage allowances, and family tax credits.

If eligible for multiple benefits, the exemption for mothers with four or more children takes precedence due to its unlimited nature. Following this, the exemption for those under 25 applies. If your income exceeds this exemption's limit, you may still apply other personal allowances up to your remaining taxable income.

Understanding your options clearly ensures that you benefit fully from available tax incentives.

Knowing your options is crucial

Finding the ideal job is challenging, especially for young people starting their careers. While gaining experience is essential, you'd also want to make the most of your earnings. The income tax exemption for individuals under 25 makes that easier.

At Ydiák, we're here to help young people find ideal job opportunities. If you need assistance in securing a suitable job, don't hesitate—reach out to us today!