What types of income are taken into account

Kela takes into account your income from employment or capital which is taxable under the Income Tax Act. Such income includes

  • wages and salaries
  • taxable social security payments and adult education allowance (study grant, the provider supplement to the study grant and the supplementary allowance for the purchase of study materials, the housing supplement, the general housing allowance and student loan are not taken into account)
  • dividends
  • rental income
  • taxable grants and scholarships
  • survivors' pensions
  • holiday pay and fringe benefits
  • freelancers' fees
  • reservists' fees
  • wage paid during period of apprenticeship training
  • care fee and expenses compensation to family caregiver.

You do not have to report your taxable income to Kela when applying for or receiving financial aid. The Tax Administration reports your taxable income from employment and capital to Kela.

In addition, Kela takes into account as your income

If you are completing vocational on-the-job training as part of an apprenticeship programme, and you are paid for the training, you cannot get financial aid at the same time. If you receive student financial aid, you must report the period of salaried on-the-job training, i.e. apprenticeship training, to Kela. Also remember that the wages you earn are income that is taken into account in the student financial aid and the housing allowance. The income is taken into account even if you can no longer receive student financial aid.

Example of apprenticeship training

A student in vocational education gets student financial aid for the first 2 years of study. The student financial aid ends in May 2019 because the student continues the studies in apprenticeship training. The student graduates in spring 2020.

  • Since the student has received financial aid at the beginning of 2019, Kela takes the income into account in the income review in connection with the student financial aid. All incomes earned in 2019 are taken into account, including the wage paid during the apprenticeship training.
  • Since the student has not received financial aid in 2020, Kela will not take the incomes for 2020 into account in the income review in connection with the student financial aid.

Income from abroad

Kela takes into account any income that you have received from abroad if comparable income received in Finland would be taxable.

Kela takes into account the pre-tax income

Kela takes into account the pre-tax (gross) income. Pre-tax income refers to income from which no deductions have been made, in other words, income from which no taxes, professional expenses, costs or any other deductions have been made.

However, in the following situations Kela does take into account certain deductions made by the Tax Administration:

  • If you have sold shares or other assets, the Tax Administration will compute your taxable capital gain by deducting, from the sales price, the acquisition price and any costs you incurred in making the gain (for example trading expenses) or the presumed acquisition cost. Capital loss is not deducted. Please provide details, to the Tax Administration, of the expenses incurred in the sale of shares or assets. The Tax Administration will then report the amount of taxable capital gain to Kela. Please take into account that a small capital gain is tax free income.
  • If you have rental income, state your expenses for the rental property to the Tax Administration. The Tax Administration calculates your rental income by deducting from it the maintenance fees, upkeep costs, electricity, water and heating charges and insurance payments you have made as the landlord. Interest and repayments on loans cannot be deducted. The Tax Administration reports the amount of rental income to Kela.

Income and the year to which it is applied

Kela considers income as earned in the year and at the amount reported by the Tax Administration. Taxable income is as a rule regarded as income earned in the year during which you received it.

However, capital gains generally are considered as income for the year in which the sale or transfer of ownership took place even if you have not yet received the income.

Check with the Tax Administration which year your income is applied to.

What types of income are not taken into account

Kela does not take into account the following types of income:

  • gifts and inheritances subject to gift and inheritance tax
  • interest on deposits if they are subject to tax at source
  • rewards and winnings subject to lottery tax
  • certain benefits paid by Kela, such as study grant, housing supplement for students, school transport subsidy, general housing allowance and child benefit
  • compensations for expenses and per-diem allowances for business-related travel
  • allowances paid for theoretical studies in apprenticeship training, family subsidies and other compensations
  • tax-exempt grants and scholarships, if the grant or scholarship is paid in 2019 or later
  • income of an undivided estate
  • tax refunds.

For more information on income taxation contact the Tax Administration.

How certain types of income are treated in the income check

  • Taxable dividends paid to an individual are regarded as income. Of the dividends paid by an exchange-listed company 85% are taxable income from capital. The rest is tax free. If you have been paid dividends by a company which is not a public corporation, check with the Tax Administration whether such dividends are taxable income.
  • An equity savings account is taken into account as income in connection with student financial aid only if money is withdrawn from the account and the account generates returns. Only the returns are regarded as income. If the account generates high returns, it is perhaps not worthwhile to withdraw money from the account during the time of study. If the account incurs losses, any money withdrawn from the account is not taken into account as income. Capital losses may thus also be deducted from the income that is taken into account in connection with student financial aid when securities are traded through an equity savings account. Withdrawals that incur losses do not, however, affect the amount of the annual income taken into account.
  • If you have received taxable income from an insurance investment such as a savings insurance plan, it is considered as income. Contact the Tax Administration to see if the income is taxable.
  • If you have received a taxable one-time payment, such as a termination payment, it is regarded as income for the year in which it is taxed.
  • Self-employment is relevant for purposes of the income check if you earn taxable income from it such as a business profit, dividend or salary.
  • The income of an undivided estate is not taken into account. You may receive income which is taken into account in the income check after the estate has been divided.
  • Rewards and winnings which are subject to lottery tax are not taken into account. However, they can sometimes be subject to income tax, in which case they are taken into account.
  • Of the interest earned on the share capital of a cooperative, 25% is taxable income from capital and 75% tax-free up to a per-year maximum of 5,000 euros.

Additional information