IRS tax deductions remain one of the most effective tools to reduce the tax burden for taxpayers in Portugal. Although many only think about IRS when it is time to file the return, the truth is that tax savings are built throughout the year by tracking expenses and knowing the legal limits.
At FA ACCOUNTING, we know that careful management of deductions can mean hundreds or even thousands of euros saved in taxes. In this article, we explain what tax deductions are, the main categories and limits in force, and how to optimize your expenses for the 2026 IRS return (2025 income).
What are tax deductions?
Tax deductions are amounts that directly reduce the tax due after applying IRS rates and brackets. Unlike income deductions, these reduce the final tax owed, which is especially advantageous for organized and well‑informed taxpayers.
The Tax Authority pre‑fills these deductions based on invoices submitted to e‑Fatura and information from schools, insurers, banks, or care homes. However, the taxpayer is responsible for validating and correcting all amounts before submission.
Main tax deductions and current limits
The rules for the IRS return filed in 2026 are generally similar to previous years, unless changed by the State Budget.
Note that there is a global limit for tax deductions, which varies according to taxable income:
- It is higher for lower incomes;
- It gradually decreases for middle and higher incomes, approaching €1,000 in higher brackets;
- Households with three or more dependents benefit from more favorable limits.
Main categories
General Family Expenses
35% of expenses, up to €250 per taxpayer (€500 for couples).
Health Expenses
15% of expenses, up to €1,000.
Expenses subject to 23% VAT require a medical prescription to be considered health-related.
Education and Training
30% of expenses, up to €800 per household, or €1,000 for students living away from home.
Housing
Rent: 15% of rent paid, up to €502.
Mortgage interest: 15%, up to €296, only for contracts signed until 31 December 2011.
Care Home Expenses
25% of expenses, up to €403.75.
Alimony Payments
20% deduction, with limits based on the beneficiary and the court decision or approved agreement.
Tax Benefits (e.g., PPR and Insurance)
PPR: 20% of contributions, with limits between €300 and €400 depending on the taxpayer’s age.
Health and other insurance: specific percentages and limits established by law.
The “cost of inaction”
Many taxpayers lose deductions simply because they:
- Do not validate invoices in e‑Fatura;
- Do not claim missing expenses;
- Do not know the maximum limits per category.
Failing to confirm expenses by the legal deadlines (usually February) can significantly reduce tax benefits, even when the expenses were actually incurred.
Tax optimization strategies for 2026
Being proactive throughout the year allows you to maximize IRS deductions:
Expense Organization
Regularly validate invoices and ensure they are correctly categorized.
Limit Management
Identify categories that have reached their limit and direct future expenses to those with remaining capacity.
Family Planning
Households with dependents benefit from higher limits, which should be factored into yearly tax planning.
Use of Tax Benefits
PPR contributions and other eligible products can make a decisive difference within the overall deduction limit.
How FA ACCOUNTING can help
Tax optimization does not need to be complex. At FA ACCOUNTING, we provide an integrated analysis of your tax profile, expenses, household, and financial goals.
We create a personalized IRS Deduction Plan to help you:
- Maximize every deduction category;
- Avoid losses due to lack of information;
- Ensure full compliance with current legislation.
Don’t leave money on the table.
Speak with us and turn your expenses into real tax savings.
Note: This article is for informational purposes only and is based on the tax laws in force at the time of publication. It does not replace professional advice, and future changes in legislation may affect the rules described.