In 2023, certain expenses incurred in 2022, such as those related to education, health, real estate, alimony, nursing homes, VAT, and general family expenses, qualify for IRS tax deductions, offering potential benefits for you. Here’s how you can benefit from these deductions and the limits associated with each category:

How to Benefit from Personal Tax Deductions in Portugal:

  1. Always include your NIF in invoices: Remember to include your personal Tax Identification Number (NIF) on every invoice (“fatura”) to be eligible for any tax deduction in Portugal. Only invoices containing your NIF will be considered by the Portuguese Tax Authority. Ensure that you request invoices with your tax number for all purchases to maximize your tax deductions.
  1. Validate all your invoices on the e-Fatura platform: To account for expenses made in 2022, validate all relevant invoices on the e-Fatura online platform within the deadline specified by the Portuguese Tax Authority (usually in February of the following tax year). The e-Fatura system serves as the basis for your annual IRS, with companies transmitting invoices with your taxpayer number to the Portuguese Tax and Customs Authority. By doing so, the Tax Authorities will make your expenses available on your personal page on the Finance Portal. This information will then be used to pre-fill your income tax return for 2022, to be submitted in 2023.

Understanding Eligible Expenses and Deduction Limits:

Not all payments in Portugal qualify for the same type of tax deduction, and the maximum deduction amount varies depending on the expenditure category. It’s important to note that in certain cases, you may not be able to deduct the entirety of your expenses if they exceed the limit. Here are the personal expenses and their corresponding maximum deduction amounts for 2022:

  1. General Family Expenses (35% deduction): This category encompasses expenses such as supermarket purchases, clothing, petrol, utilities, and other general expenses. You can deduct up to a maximum of €250 per taxpayer. For single-parent families, the deduction percentage rises to 45% with a limit of €335.
  2. Health Expenses (15% deduction): You can deduct 15% of your health-related expenses, up to a maximum of €1,000. This includes medical appointments, surgical operations, hospital stays, treatments, medication, prostheses, orthodontic braces, eyeglasses, and health insurance.
  3. Education Costs (30% deduction): Expenses associated with education have a limit of €800, covering fees for schools, day-care centers, kindergartens, college/university tuition, textbooks, school books, tutoring, meals, transportation, and rent for displaced students. If there are additional expenses for student rent justifying the increase, the general limit of €800 can be raised to €1,000. The maximum deduction for student rent is €300. Families with students enrolled in schools in the Interior region of Portugal can benefit from deductions up to 40% with a limit of €1,000.
  4. Housing Costs (15% deduction): You can deduct 15% of your housing costs, up to a maximum of €502. If you have a home loan taken out before December 31, 2011, you can deduct 15% of the interest expenses, with a maximum deduction amount of €296.
  5. Senior Nursing Homes (25% deduction): Expenses related to senior home support, nursing homes, and institutions supporting the elderly are eligible for a 25% deduction, up to a maximum of €403.75. This category also covers expenses for nursing homes and residences for disabled people, dependents, ascendants, and collateral family members up to the third degree, provided their income is less than the national minimum wage.
  6. Alimony Payments (20% deduction): You can deduct 20% of your alimony payments without any limits.
  7. VAT (15% deduction): Expenses in certain categories allow you to deduct 15% of the VAT paid, up to a maximum of €250 per taxpayer. These categories include restaurants and hotels, hairdressers/beauty salons, car and motorcycle repairs, veterinary costs, and sports club and gym/fitness activities.
  8. Social Transportation Passes (100% deduction): You can deduct 100% of the VAT paid on social transportation passes, up to a limit of €250.

By following these guidelines and understanding the various deduction categories and their limits, you can optimize your Personal Income Tax in Portugal. Make sure to consult with the Portuguese Tax Authority or a tax professional for specific guidance tailored to your situation.

If you are looking for an excellent Accountant who speaks great English, and can assist you with setting up your activity and walking you through the Recibo Verde Process and assist you with learning to use the “Financas” website, contact the Gateway to Portugal Team today to set up a call. Please reach out via WhatsApp +351 915 523 146 or email info@gatewaytoportugal.net

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