How income tax works and how to legally pay less tax.

How does income tax work?

Did you know that it's possible to significantly reduce the income tax we pay every year?

Many people are unaware of the various legal ways to reduce their taxes.

Want to know how to legally pay less taxes and improve your... income tax return?

Let's look at the best ways to understand the Brazilian tax system and lower your taxes.

Key points to highlight

• Understanding how income tax works.
• Advantages and disadvantages of the Complete and Simplified models.
• Deductible expenses that can reduce the amount owed.
• The importance of correctly including dependents in the tax return.
• Ways to take advantage of discounts on home renovations and investments.

What is income tax and how does it work?

Income tax is an important federal tax in our country. tax system.

It is levied on the income of those who work. Federal Revenue Service takes care of everything, including deadlines and rules for payment. GO.

If you earned more than a certain amount, you need to file an income tax return.

This helps to avoid problems with the Federal Revenue Service.

In 2025, anyone who earned more than R$ 33,888.00 must file an income tax return.

The deadline for this is from March 17th to May 30th. If you are late, you may have to pay fines.

Those who have to pay income tax include anyone who earned more than R$30,639.90.

Also, those who have assets valued above R$ 800,000.00.

And who invested in the stock market?.

Furthermore, anyone who earned more than R$ 153,199.50 from rural activities must also file a tax return.

There are two ways to file: complete and simplified.

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Declaration Type	Benefits
Complete	Recommended for those with many deductible expenses, such as health and education, as it lists all possible deductions.
Simplified	Ideal for those with few deductible expenses, it applies a standard discount of 20% on taxable income, limited to R$ 16,754.34.

A Federal Revenue Service Make the statements available in March.

Tax refunds begin on May 30, 2025. Seniors and people with disabilities are served first.

Declaration Templates: Complete and Simplified

When we choose between full statement and the simplified declaration, We should think carefully about our expenses and income for the year.

Each type has its advantages and disadvantages. This can greatly change how much we pay or receive back.

A full statement It's good for those who have many deductible expenses, such as health and education.

These expenses must be borne by the taxpayer or their dependents.

This model is best suited for those earning more than R$83,771.70 per year, or R$6,980.97 per month.

It is essential to keep receipts for these expenses for at least five years.

A simplified declaration gives a discount of 20% on taxable income, up to R$16,754.34.

It's a good choice for those who don't have many expenses to declare.

This option does not require proof of expenses, which helps save time and avoid tax problems.

Here are the main differences between the two declaration models:

Aspects	Full Statement	Simplified Declaration
Type of deduction	Actual expenses with supporting documentation.	Standard discount of 20%
Deduction limit	Without absolute limit	R$16.754,34
Recommended profiles	Annual income exceeding R$83,771.70	Lower volume of deductible expenses
Proof required	Yes, store for 5 years.	No

Until the deadline, we can change our minds about the choice of statement.

But once submitted, we can no longer change it. Therefore, it is crucial to choose carefully before submitting. Federal Revenue Service.

Deductible Expenses: Health, Education, and Others

Expenses related to health and education are very well known for tax deductions.

There is no limit to the amount of medical expenses that can be deducted. We can include medical consultations, tests, and procedures on the tax return.

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Spending on education is also important.

Each person can deduct up to R$ 3,561.50 per year. This includes school fees and higher education courses.

Image: Canvas

Dependents are also taken into account in the tax return.

We can deduct R$ 2,275.08 per dependent per year. This helps reduce income tax.

Keeping receipts for expenses is essential. Therefore, tax deductions They are accepted by the Federal Revenue Service.

Contributions to private pension plans are also deductible.

For example, up to 12% of annual taxable income can be deducted. If we earn R$ 100,000, we can deduct up to R$ 12,000.

Type of Expense	Deduction Limit
Education	R$ 3,561.50 per person per year
Dependents	R$ 2,275.08 per dependent per year
Private Pension Plan (PGBL)	12% of taxable income
Medical Expenses	No limit

For those who choose the simplified model, the deduction is 20% from the income.

But it doesn't exceed R$ 16,754.34. This is a good option for those who don't have many specific expenses.

To take advantage of these deductions, it's important to organize well.

Make sure you have all the supporting documents in order for the tax return.

How to best utilize dependents in the tax return.

Include dependents IR in your income tax return This can be a great strategy. This can help to reduce tax and save a lot.

The deadline to file your 2025 income tax return is from March 17th to 30th. Understanding the rules and advantages of including dependents is essential.

It is possible to include children, stepchildren, spouses, and other family members.

This depends on your financial situation and age. Children and stepchildren under 21, or up to 24 years old if studying, can be dependents.

Children or stepchildren with disabilities may also be included, provided their income does not exceed certain limits.

Parents, grandparents, and great-grandparents can be considered dependents if they received up to R$ 24,511.92 in 2023.

Include dependents IR This can significantly reduce the tax. This is especially true if the dependent has a good income.

For each dependent, the annual deduction is R$ 2,275.08. This can be very useful for reduce tax.

It is important to report all income, expenses, and assets of dependents.

It is also necessary to provide supporting documentation for expenses.

In cases of shared custody, only one parent can declare a dependent.

It's important to avoid declaring dependents twice to avoid problems.

The income tax program does not automatically assess whether to include dependents in the tax return. income tax return It is advantageous.

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Therefore, it is advisable to run simulations to find the best solution.

Organizing and storing documents throughout the year makes filing your tax return much easier. This helps avoid problems with the Internal Revenue Service.

Mistakes should be corrected quickly to avoid fines.

Thus, we can maximize the benefits of including dependents in income tax return and save more.

Advantages of choosing the right type of Declaration

Choose between full statement And the simplified version is essential.

This helps to take advantage of the IR advantages and to do a good tax planning.

Each type has its benefits, such as deductions and ease of use.

In full statement, we can deduce education expenses up to R$ 3,561.50 per person.

There's no limit to healthcare expenses, which is great for those who spend a lot on healthcare.

In addition, there is a deduction of R$ 2,275.08 per dependent, reducing the tax.

A simplified declaration, in turn, allows for an automatic deduction of 20% from income.

The limit is R$ 16,754.34, perfect for those with few deductions.

It's ideal for those looking for an easy way to fill out the form.

The Federal Revenue Service program helps you choose the best tax return. Simply enter your deductible income and expenses.

The deadlines for submission are from March 1st to May 30th, 2025. The limit for taxable income is R$ 33,888.

Therefore, it's important to analyze our finances and expenses.

Therefore, we can choose the best model for our situation, ensuring the best tax return.

Tax Deductions: Renovations and Other Expenses Related to Real Estate

You income tax deductions They are very important when doing the asset declaration.

The Internal Revenue Service allows expenses for renovations. This helps justify the increase in property values.

The updated property value should include expenses for renovations paid in the same year as the tax return.

For example, for the 2024 Income Tax Return, expenses from 2023 are considered.

Imagine a property financed by R$ 150,000. By 12/31/2023, R$ 40,000 had been paid and R$ 10,000 spent on renovations.

The final declared value will be R$ 50 thousand.

For properties that are fully paid off, renovation costs are added to the acquisition value from the previous year.

The types of expenses allowed include:

• Construction, expansion and renovations with projects approved by municipal authorities.
• Small jobs, such as painting and repairs to tiles and plumbing.
• Public works, such as curbs and road paving.

It is essential to detail the expenses. Include the invoice number, purchase date, amount spent, and supplier.

For services provided by individuals, the receipt must include the date of service, the provider's CPF number (Brazilian tax identification number), and the service fee.

When selling a property, the capital gain is taxed under code 15%.

For example, a property bought for R$ 300 thousand and sold for R$ 600 thousand would have a profit of R$ 300 thousand.

This would result in a tax of R$ 45 thousand.

With the declaration of improvements of R$ 100 thousand, the value of the property in the declaration increases to R$ 400 thousand.

This reduces the profit to R$ 200 thousand and the tax to R$ 30 thousand.

Thus, there is a saving of R$ 15 thousand.

These expenses must be equivalent to at least 1% of the property's market value.

The capital gains reduction factor reduces the tax base for income tax purposes.

For keeping receipts, the retention period is 5 years.

It's important to remember that only receipts from the same tax year as the tax return can be included.

In addition, platforms like QuintoAndar issue rental income statements.

These earnings are important for the asset declaration and to make the most of income tax deductions.

Income Tax for Self-Employed Individuals: Possible Deductions

Filing an income tax return for self-employed individuals may seem complicated, but there are several deductions that make the process easier.

Working as a freelancer offers tax advantages.

This includes operating expenses and up to one-fifth of household expenses if the work is done from home.

Let's better understand how to optimize these deductions.

For those who work independently, it's crucial to keep detailed track of expenses.

This includes operating expenses such as telephone, office supplies, commercial space rental, and utilities.

We cannot forget about deductions for publication and special clothing required for professional activity.

Many self-employed individuals use their own homes as a workspace.

In this case, *separate taxation* allows you to deduct up to 1/5 of your work-related household expenses.

This aspect is especially beneficial for reducing the incidence of Income Tax.

Furthermore, there is the possibility of deducting contributions to unions and associations, as well as expenses for congresses and seminars.

These expenses must be necessary for the self-employed activity and not be reimbursed.

It's important to remember that all these deductions must be recorded in the Cash Book.

It is worth noting that the income tax rates for self-employed individuals range from 7.5% to 27.5%, depending on the amount received.

Social security contributions (INSS) vary from 11% in the Simplified Social Security Plan to 20% on the self-employed worker's remuneration, respecting the ceiling limit.

Let's look at some critical numbers.

If the taxable income for the previous calendar year is R$33,888.00, the self-employed individual is required to file an income tax return.

For rural activities, this value increases to R$169,440.00.

Tax-exempt or non-taxable income totaling R$200,000.00 also requires a tax return.

The Simples Nacional (Simplified National Tax System) is another relevant aspect, simplifying taxation by allowing the collection of various taxes in a single payment slip, the DAS.

*Self-employment deductions* are essential for the financial health of these professionals.

They allow everyone to pay only what is fair.

Private Pension Plans: How They Can Help Reduce Taxes

Contribute to a plan of private pension income tax type PGBL This could be a good strategy.

This helps reduce taxes. You can deduct up to 12% from your taxable income on your income tax return.

For this, it is necessary to invest in this plan and also contribute to the INSS (Brazilian Social Security Institute).

A private pension There are different types of taxation. There is regressive and progressive taxation. The choice between them affects the... tax reduction.

In the regressive model, tax rates are higher in short periods. They decrease over time.

Investment Period	Tax Rate
Up to 2 years	35%
From 2 to 4 years old	30%
From 4 to 6 years old	25%
From 6 to 8 years old	20%
From 8 to 10 years old	15%
Above 10 years old	10%

In progressive taxation, the rates vary from 0.% to 27.5%. They depend on the income bracket.

But remember, the progressive scale starts at 15% and increases annually.

Here's an example: Maria earns R$ 200,000 per year.

She spent R$ 18,000 and invested R$ 24,000 in a PGBL. This increased your deductions, reducing your taxes and increasing your refund.

To qualify for the minimum 10% tax rate on the regressive tax table, Maria would need to maintain the investment for 10 years.

This shows that the private pension income tax It is essential for retirement. It helps reduce taxes and optimize resources.

Investments that help reduce income tax.

You IR investments They are important for reducing taxes.

Supplementary Pension Plans, such as PGBL, These are great examples. They allow tax-exempt profits.

To invest in PGBL and reduce taxes, the deadline is December 30th.

These plans allow you to deduct up to 12% from your gross income.

For example, if you have R$ 420 thousand in income, without PGBL, you pay R$ 400 thousand in tax.

But, by investing R$ 50 thousand in PGBL, you pay R$ 350 thousand, saving R$ 13,750.

In a regressive tax regime, the tax rates change over the investment period:

Period Maintained	Income tax rate
Up to 2 years	35%
From 2 to 4 years old	30%
From 4 to 6 years old	25%
From 6 to 8 years old	20%
From 8 to 10 years old	15%
Above 10 years old	10%

In simplified declaration, PGBL is not beneficial.

However, there is no withholding tax on pension plans. This helps to multiply investments over time.

And after 10 years in the PGBL (Private Pension Plan), the tax drops to 10%, much lower than the 15% of common investments.

Real Estate Investment Funds (REITs) also help to reduce taxes.

They offer tax-exempt income to individuals, provided they meet certain requirements. This makes them a good option for... IR investments.

It is crucial to analyze each investment from a tax perspective before investing.

Thus, we can maximize tax benefits and ensure tax-exempt profits whenever possible.

Rental Income and Property Taxes: Possible Deductions

Landlords who rent out properties can take advantage of several deductions.

Income tax on rental income has varying rates. This can result in a much lower tax payment.

For example, if the monthly rent is up to R$ 2,259.20, no tax is paid.

If the income is between R$ 2,259.21 and R$ 4,664.68, the tax rate ranges from 7.5% to 22.5%. There are specific deductions for each bracket.

Income Bracket (Monthly)	Aliquot	Deductible Portion
Up to R$ 2,259.20	Free	Free
From R$ 2,259.21 to R$ 2,826.65	7,5%	R$ 169.44
From R$ 2,826.66 to R$ 3,751.06	15%	R$ 381.44
From R$ 3,751.07 to R$ 4,664.68	22,5%	R$ 662.77
Above R$ 4,664.69	27,5%	R$ 896.00

Furthermore, expenses such as property tax and condominium fees can be deducted. This helps to reduce the tax even further.

But remember, the Internal Revenue Service can request proof of these expenses for up to 5 years.

Donations and Social Investments: Reducing Taxes Legally

To the donations IR They are a great way to help social causes and save on taxes.

In Brazil, we can deduct up to 6% from our taxes by donating to children's rights funds.

This not only helps society, but also reduces income tax.

You tax benefits donations They go beyond children's funds. We can allocate up to 7% of tax to sports and 4% to culture.

Companies also have advantages, being able to deduct up to 30% from their investment in culture.

Donation Type	Individuals	Legal Entities
Children and Adolescent Funds	6% of IR due	1% of IR due
Sports Projects	7% of IR due	2% of IR due
Cultural Projects	6% of IR due	4% of IR due
Federal Public Utility Entities and OSCIPs	–	2% of operating profit

In 2022, the potential for donations was R$ 9.65 billion.

But only R$ 278 million was donated. This shows that we can do much more. Let's make a difference together!

Common Mistakes in Income Tax Returns and How to Avoid Them

It is very important to avoid mistakes when filing your income tax return. This helps to avoid fines IR and financial problems.

A common and serious mistake is failing to include your own income or that of your dependents.

It is essential to include all income for the year.

Another common mistake is replacing commas with periods or not including decimal places. This can significantly alter the values you declare.

For example, R$ 1,000.00 can be entered as R$ 100.00.

It is also a mistake to classify taxable income as tax-exempt, which can cause problems with the Internal Revenue Service.

Forgetting to include dependents, such as scholarship recipients, is another common mistake.

Not having receipts or invoices for medical expenses is also rejected by the tax authorities.

Providing incorrect bank details can delay your refund for up to a year.

Declaring non-deductible expenses, such as courses, may lead to the rejection of the tax return.

Failure to declare acquired assets or updating values incorrectly can also result in fines.

Therefore, it is crucial to review everything before submitting.

Many mistakes happen due to a lack of preparation.

Therefore, it's best to start filing your tax return early. This helps avoid mistakes and makes the process easier.

Common Mistake	Possible Penalty	Solution
Omission of Income	Severe Fines	Include all income.
Replacing Commas with Periods	Discrepancies in Values	Review all values
Incorrect Classification of Income	Problems with the Internal Revenue Service	Check for correct classification.
Include Dependents with No Income	Error in the Declaration	Add dependents' income
Medical Expenses without Receipts	Rejection of Expenses	Keep valid receipts.
Incorrect Bank Account Details	Delay in Refund	Review bank details
Non-Deductible Expenses	Rejection of the Declaration	Certify permitted deductions.
Failure to Declare Acquired Assets	Fines	Declare all assets correctly.

To avoid errors in income tax return, It's important to start early and review everything carefully. This way, we can avoid fines and have a trouble-free process.

How Income Tax Works: Conclusion

This article has shown several ways to legally reduce income tax.

It's crucial to understand how income tax works.

It's also important to know which tax returns are most advantageous and how to maximize deductions.

Using all deductible expenses, such as healthcare and education, is essential.

Furthermore, correctly declaring dependents brings benefits. Opting for private pension plans and investing in real estate and donations also helps.

For freelancers, these strategies are even more important.

It is vital to avoid errors in the declaration and to use free services for tax consultations.

Planning our finances well not only complies with the law.

It also makes resource management more efficient and fair. Therefore, we legally pay less in taxes.