Individuals have the right to deduct their personal expenses from taxes, and there are four concepts that represent 86% of what the treasury stops collecting for granting these supports included in the tax laws and the Federal Tax Code (CFF).
Of the 2.9 million natural persons, 2.5 million filed their annual Income Tax (ISR) declaration this year, according to figures from the Ministry of Finance and Public Credit (SHCP), until the end of June.
When filing the annual return, taxpayers can include expenses that help reduce the tax burden, and have credit balances with the Tax Administration Service (SAT), which can be returned to the taxpayer or taken as compensation for future returns.
Currently, the concepts of personal deductions are 10, twice as many as in 1978.
Tax-free personal expenses:
1.- Medical, dental, psychology, nutrition and other hospital expenses.
2.- Medical expense insurance premiums.
3.- Medical, dental or nursing fees due to disability or disability.
4.- Funeral expenses.
5.- Non onerous or remunerative donations.
6.- Real interest paid for mortgage loans.
7.- Savings deposits, premiums for pension plan insurance contracts, and shares in investment companies.
8.- Contributions to accounts for retirement plans, individual or collective; also to the voluntary contributions subaccount.
9.- School fees
10.- School transportation.
Taxpayers with greater economic capacity are the ones who make the most deductions and are benefited by them. People in the tenth income decile, the highest level in Mexico, concentrate 80% of the total personal deductions, while those in the first decile, only 0.1%, highlights the 2022 Treasury Waiver report.
The deductions that most represent collection waivers to the treasury are those made for real interest on mortgage loans. For this year, the SAT plans to stop collecting 12,376 million pesos for this concept, and for the following year it estimates 13,312 million.
These deductions apply when the credit is less than 5 million pesos.
Expenses for medical and dental fees, for professional services in the field of psychology, nutrition and hospitals fall into this category, which occupies the second place as SAT collection waiver for personal income tax.
In order for them to apply, it is essential that you pay them with some electronic method, that is: transfer, card payment, CoDi, or the taxpayer’s nominative check.
Payments made in cash for medical fees are not deductible, the SAT will reject them when you file the annual return and request a credit balance, for this and/or other concepts.
The third concept is the monthly payment for contracting medical insurance.
According to the SAT, health expenses will be deductible when they have been incurred for the taxpayer himself, his spouse or partner, his parents, grandparents, children and grandchildren.
In fourth place are expenses for tuition in private institutions. These are limited to an annual amount, according to the educational level.
Preschool: 14,200 pesos Primary: 12,900 pesos
Secondary 19,900 pesos
Technical professional 17,100 pesos
Baccalaureate or its equivalent: 24,500 pesos.
The deductions do not apply to expenses for professional or university level.