Taxpayers may see lower refunds or even owe taxes this year, largely due to changes in withholding rates. Despite this potential shift, there are strategies individuals can employ to optimize their tax returns.
DECO PROteste has outlined five key tips to aid taxpayers optimize their declarations and potentially increase their refunds, or at least minimize their tax liabilities.
Manually Adding Expenses
Not all eligible expenses are automatically populated on tax returns. Taxpayers who have validated expenses on the e-Fatura platform or have qualifying expenses not automatically included – such as international education costs – can manually add them to Schedule H. It’s important to note that manual entry will replace any automatically populated values, and supporting documentation must be retained for four years.
New Deduction for Domestic Services
Beginning in 2025, taxpayers can deduct 5% of expenses related to domestic services, up to a maximum of 200 euros. If these deductions do not appear automatically, they must be manually entered on the tax return.
Interest Income Considerations
Taxpayers with interest income from term deposits or savings certificates may benefit from including this income in their overall tax calculation. This strategy is generally advantageous for those with total income up to approximately 22,000 euros, but may not be beneficial for higher earners. Simulating different scenarios before submitting is recommended.
Young Taxpayers and IRS Jovem
Individuals with income up to 8,500 euros are exempt from filing a tax return. For young taxpayers, this can be advantageous as it avoids using a year of the IRS Jovem benefit without realizing its value.
Evaluating the Automatic Tax Return
While the automatic tax return option offers convenience, it may not always yield the most favorable outcome. Taxpayers are advised to simulate a manual filing before accepting the automatic calculation. In some cases, filing jointly may be more beneficial than filing individually.
The IRS, or Imposto sobre o Rendimento das Pessoas Singulares, is the personal income tax levied by the state on earnings throughout the year.
