How to Legally Reduce Your IRS Tax
The Portuguese tax code offers several legal tools to reduce IRS. Below are proven strategies with specific amounts.
1. PPR — Pension Fund with Guaranteed Tax Credit
What is PPR? The government says: "Put money in a pension fund and we'll immediately return 20% of the amount from your taxes." That's PPR (Plano Poupança Reforma).
How it works:
Age-based limits:
| Age | Max credit | Max deposit |
|---|---|---|
| under 35 | €400 | €2,000 |
| 35–50 | €350 | €1,750 |
| 50+ | €300 | €1,500 |
Important: the credit reduces the actual tax (coleta), not income — very valuable!
Caveats: money is locked in for at least 5 years. You can withdraw earlier but lose part of the credit.
2. Category B: Simplificado vs. Organizada
If you're self-employed (recibos verdes), the accounting regime directly affects your tax.
Simplificado (simplified):
Organizada (actual accounting):
Key coefficients:
| Income type | Coefficient | Taxable portion |
|---|---|---|
| Most services | 0.75 | 75% |
| Trade, hotels | 0.15 | 15% |
| Mining crypto | 0.95 | 95% |
3. Medical Expenses — 15% credit
15% of expenses returned from tax, limit €1,000.
What counts via e-Fatura: doctors, dentistry, surgery, prescription medicines, glasses, contact lenses, psychotherapy, physiotherapy, lab tests.
Tip: always request NIF at payment — otherwise it won't appear in e-Fatura.
4. Education — 30% credit
30% of expenses returned from tax, limit €800 (€1,000 for interior regions).
Counts: university (including EU/EEA abroad), language courses, professional certifications (since 2024), school and kindergarten for children.
5. Crypto — the 365-day strategy
Since 2023, a simple rule applies:
Hold crypto > 365 days → 0% tax (Cat.G)
Key points:
6. Capital Losses — 5-year carry-forward
Sold stocks/crypto at a loss this year? Carry forward the loss for up to 5 years.
Condition: must opt into englobamento (including Cat.E/F/G in progressive rates). Not available under the flat 28% regime.
7. Rent Payments — 15% credit
Renting with an official contract? Get 15% of rent back.
Limit: €600/year (2024), €700/year (2025)
Conditions: contract registered at AT; landlord issues recibo de renda with your NIF.
8. IRS Jovem — Under 35
Young professionals (≤35 years old) get a progressive exemption for the first 10 years of employment:
| Year | Exemption |
|---|---|
| 1–2 | 100% |
| 3–5 | 75% |
| 6–7 | 50% |
| 8–10 | 25% |
Cap: €28,737.50/year. Must be selected manually in the AT declaration.
9. Alimony — 20% no limit
Paying court-ordered alimony? 20% deduction with no upper limit — one of the few uncapped deductions.
Condition: court-ordered alimony only (pensão de alimentos).
10. Domestic Services — 5% (2025)
From 2025: official employment contract with a housekeeper, nanny, or cleaner qualifies for a 5% deduction, limit €200/year. Requires formal contract and SS contributions.
11. Union Dues — 200% deduction
Trade union membership fees are deducted at 200% of the amount paid.
Limit: 1% of gross income
E.g., paid €100 in dues → €200 goes as a deduction in the return.
12. Disability — Tax Benefits
With disability rating ≥60% (AMIM):
Requires a confirmed disability document from médico de família.
All strategies are legal and based on current CIRS. Consult a TOC (certified accountant) before applying.