Finland's tax authority has announced a sweeping set of reforms that will reshape personal finances, from home offices to inheritances. The changes, detailed in a Monday announcement from the Finnish Tax Administration (Verohallinto), will be implemented between 2025 and 2026, affecting millions of taxpayers. The package includes the elimination of popular deductions, adjustments to value-added tax, and significant increases to tax-free thresholds for gifts and inheritances. This marks the most substantial update to the Finnish tax code in recent years, reflecting shifting work patterns and government fiscal priorities.
The End of the Home Office Deduction
The most immediately impactful change for many employees is the removal of the standard home office deduction (työhuonevähennys). Starting in 2026, salaried workers will no longer be able to claim this fixed deduction for work performed at home or in a leisure-time residence. The final claim for the 2025 tax year can still be made in the spring 2026 tax return. This deduction, a fixture for remote workers, has become increasingly relevant since the pandemic accelerated hybrid work models. Its elimination signals a shift in how the state views the cost burden of remote work, placing it squarely on the employee. Tax analysts suggest this could disproportionately affect lower and middle-income remote workers for whom the deduction provided meaningful relief.
Shifts in Deductions and Benefits
Two other notable deductions are being scaled back. The tax deductibility of trade union membership fees will be removed entirely. Fees paid in 2025 can still be deducted on next spring's return, but this benefit ends thereafter. Unemployment fund (työttömyyskassa) payments will remain deductible, maintaining an incentive for this form of income security. Furthermore, the tax exemption for employer-provided bicycles (työsuhdepolkupyöräetu) is being abolished for agreements made on or after April 24, 2025. Existing bicycle benefit agreements remain tax-free until the end of the contract period, up to a maximum of five years from the start. These changes narrow the scope of tax-advantaged benefits, focusing incentives more narrowly on specific policy goals like unemployment protection.
Inheritance and Gift Tax Thresholds Rise
In a move that will benefit families, the government is significantly raising the tax-free thresholds for inheritances and gifts. From next year, an individual can gift another person up to €7,499 tax-free every three years, a substantial increase from the current €4,999 limit. More significantly, the inheritance tax threshold will rise to €30,000 from the current €20,000. This means estates valued under €30,000 will be entirely exempt from inheritance tax (perintövero). The late-payment interest rate on inheritance tax will also be reduced. These adjustments are likely a response to long-standing criticism that inheritance tax disproportionately impacts smaller estates and complicates the transfer of family homes and modest savings. It represents a direct financial benefit for heirs, particularly in cases involving a primary residence or a lifetime of accumulated savings.
VAT Reduction on Essential Goods
A key consumer-facing change is a reduction in the reduced value-added tax (ALV) rate. The rate applied to a basket of essential goods and services will drop from 14% to 13.5% at the start of 2026. This lower rate category includes foodstuffs, restaurant and catering services, pharmaceuticals, passenger transport, and accommodation services. The standard VAT rate remains at 25.5%. This targeted cut aims to slightly ease the cost of living, particularly for essential items. While a half-percentage point reduction may seem modest, applied across the entire food and pharmacy sector, it represents a significant fiscal policy choice to provide broad, if slight, consumer relief rather than targeted transfers.
New Rules for Financial Customer Bonuses
The tax treatment of customer bonuses from banks and financial institutions is being tightened. Bonuses or rebates paid by a bank based on the amount or value of a private household's credits, deposits, or investments will now be classified as taxable capital income. For example, bonuses accrued from loans can no longer be used tax-free to pay insurance premiums. The bonus is only tax-free if it is used for the specific services, service fees, or loan interest from which it accrued, is not paid out in cash, and the customer cannot influence how the bonus is used. This change closes a loophole, ensuring these financial incentives are captured within the tax base. The reform is specific to the financial sector; bonuses, discounts, and rebates from retail stores based on private household purchases remain tax-free.
A Push Toward Digital-Only Communication
In a procedural shift, the Tax Administration announced that henceforth, its letters and decisions will be delivered exclusively through the OmaVero portal for taxpayers who use OmaVero or other digital government services. Taxpayers will receive a notification of new tax mail when they have activated the Suomi.fi Messages service or provided a phone number in OmaVero. This move accelerates Finland's digital transformation of public services, aiming for greater efficiency and cost savings. It does, however, place an onus on citizens to be digitally connected and proactive in checking the portal, potentially raising accessibility concerns for elderly or digitally excluded populations.
Analysis: Balancing the Budget and Fairness
This package of reforms presents a mixed fiscal picture. The removal of deductions for home offices and union fees, along with the taxation of financial bonuses, broadens the tax base and increases state revenue. Simultaneously, the raised thresholds for gifts and inheritances, along with the VAT cut on essentials, reduce the tax burden for specific groups and activities. "The government is engaging in a recalibration," said a Helsinki-based tax policy analyst who requested anonymity. "They are pulling back support from areas like remote work, which they may see as now normalized, and providing relief in areas of intergenerational wealth transfer and daily living costs. The net effect on progressivity and fairness will be hotly debated in the Eduskunta."
The changes reflect broader EU-wide discussions on taxing the digital economy and modern work arrangements, though Finland is implementing its own distinct blend of policies. The elimination of the home office deduction, in particular, may face political backlash from center and left-leaning parties who argue it penalizes flexible workers and fails to acknowledge employees' ongoing costs. Conversely, the inheritance tax change will be popular across the spectrum, as it simplifies a emotionally charged tax and benefits ordinary estates. As these reforms roll out over the next two years, their real-world impact on household budgets, work choices, and savings behavior will become the ultimate test of their design.