What are deductible expenses? Examples and how to include them

What constitutes deductible expenses is a question that always arises during the period for filling out the income tax return.

That's because the possibility of receiving a discount and increasing the chances of a refund is always attractive.

But what are deductible expenses? What are some examples and accepted categories? How do I include this information on my income tax return?

These issues will be addressed throughout the following content, in which we will cover everything about deductible expenses.

So, if you want to learn everything about the subject and benefit from this knowledge in your annual tax return, come with us!

What are deductible expenses?

As soon as tax season arrives, deductible expenses become a hot topic.

In general, the recommendation is that taxpayers remember to include their deductible expenses.

But to do that, it's important to know what they are.

Deductible expenses are also called tax-deductible expenditures, and they include all expenses that are eligible for a reduction in the tax owed to the Internal Revenue Service.

This means that these expenses are interpreted by the tax authorities as "excess expenses," and that they can be deducted from the amount owed.

Therefore, the amounts declared as deductible expenses are subtracted from the amount of tax due for the year.

So, let's assume you owe R$ 5,000.00 in annual income tax, and you declare deductible expenses that result in a value of R$ 900.00.

These R$ 900.00 are deducted from the R$ 5,000.00, so your debit becomes R$ 4,100.00.

If you have already paid the taxes due, this excess amount will go through the refund process.

But if you haven't paid yet, and will settle the payment on your tax return, you will receive the discount directly on the taxes owed.

Therefore, including deductible expenses is very important for those who wish to receive discounts when paying income tax.

It's worth noting that for an expense to be accepted as deductible, it must be documented and correspond to the calendar year of the tax return.

But now that we understand the concept, what about examples? What expenses are acceptable? 

We'll see later! 

Examples of deductible expenses

By now you understand what deductible expenses are, and you know that this is a good way to get a discount on your income tax.

Therefore, we only need to discuss examples so that you understand what might be part of the relationship.

But before we talk about that, it's important to explain the rules for including this type of expense.

This is because some people believe that the value to be considered is directly proportional to the amount that was paid.

Therefore, if I paid R$ 100.00 for a medical consultation, can I deduct R$ 100.00 from the tax I owe? 

The answer to that question is no, since there is a calculation for the deduction, which includes value limits.

Therefore, the amount subtracted is not equal to the actual expense, as it depends on the limits and the calculation performed.

Furthermore, for the expense to be considered, it must correspond to the accepted examples, which we will see below.

And last but not least, to declare a deductible expense you must submit supporting documentation.

This includes bank statements and invoices that prove the expense.

That being said, let's see what expenses we can include.

Spending on education

The main criterion for defining deductible expenses is related to education costs.

Therefore, if you have expenses related to basic education, higher education, or vocational courses, you can deduct them from the tax you owe.

Thus, the amounts corresponding to monthly fees or even total payment are taken into account. 

Therefore, it is possible to deduct up to R$ 3,561.00 per dependent.

It's worth mentioning that it's very important to make sure that the type of educational expense is accepted, and to keep the receipts.

Healthcare expenses 

In addition to deductible education expenses, healthcare expenses can also be included on the list.

Therefore, if you have medical appointments or expenses related to health insurance plans, those expenses are considered for the discount.

Unlike education expenses, there is no limit in this category.

Therefore, any amount spent can be included in the calculation base.

But be aware: not all types of healthcare expenses are accepted, and it's very important to keep the receipts.

Therefore, if you pay for health insurance, keep your monthly receipts, and in case of a consultation, request invoices.

Child support

Alimony expenses can also be included in income tax deductions.

It's worth mentioning that there are plans to change this, but currently the possibility still exists.

For pension purposes, deduction amounts can be up to 100%.

Therefore, the amount you pay as alimony can be fully converted into a discount on your income tax.

But for that to be the case, the pension must be registered with the courts, and the amounts must comply with official regulations.

In addition, you should also include your monthly payment receipts.

Private and social security 

If you have expenses related to private or social security contributions, these can also be included in the deduction.

In the case of private pension plans, you must report the amounts paid monthly and attach the receipts.

In the case of social security, the INSS (Brazilian National Institute of Social Security) amounts are already available to the tax authorities; you only need to fill in the information.

Therefore, in general, if you pay any amount related to social security, these qualify as deductible expenses.

Donations

Making donations is perhaps the best-known criterion for deductible expenses. 

After all, who hasn't heard the joke "this donation is to reduce income tax"? 

And the truth is that donations to NGOs, funds, and social projects can deduct up to 61% of the tax owed.

But be aware that this discount is only valid for official donations that are destined for verified entities.

As in all cases, you must include the receipts and specify the institution that received the donation. 

Dependent costs 

Dependent expenses are the simplest way to obtain deductible expenses.

This is because it is understood that dependents generate costs for the taxpayer.

Therefore, some of these costs may reduce the amount of tax owed.

To do this, simply provide the personal information of your dependents and their relationship to you.

It's worth mentioning that there are rules for including children as dependents, and the main one is that this information must already be included on the payslip.

Furthermore, only one parent can list the child as a dependent.

It is worth mentioning that the maximum discount per dependent is R$ 2,275.08. 

How do I include deductible expenses on my income tax return?

By now you know what deductible expenses are, and you understand which expenses you should consider.

With that, all that remains is to explain how you can include these expenses in your annual income tax return.

You should fill in your information as usual, including all the requested data.

There is a dedicated tab for including deductible expenses, which will appear in the following order:

• Education;
• Medical expenses;
• Social security and private pension plans;
• Pension fund;
• Dependents;
• Union dues;
• Rent in case of subletting;
• Donation.

You will need to fill out each tab individually, providing the required information when applicable, and if there is nothing to fill in, simply skip ahead.

Remember to include supporting documents and descriptions with each entry.

This ensures that the information will be accepted and complies with the regulations of the Federal Revenue Service.

As we have seen, filling out the deductible expenses section is not difficult; all it takes is attention and gathering the necessary documents.

This way, you can get discounts and keep your tax payments up to date!