The reduction of income tax will depend on how many family obligations the taxpayer has, not on the amount of income, and with this change – which is proposed in the draft of the Organic Law for Strengthening the Family Economy – it will be reduced to which the higher amount can be applied.

This tax reform was presented by the executive power to the National Assembly on May 11 as an economic emergency, so it must be processed within a maximum of 30 days and will be immediately applicable.

How much income tax will you pay if the tax reform is implemented?

Currently, there is a reduction of 10% and 20% of personal expenses, which had seven basic baskets as a limit. A 10% discount was given to those who reported an annual income of more than $25,000, in which case the discount was about $500, considering that seven baskets are equivalent to approximately $5,000. And 20% who had less than that value (then the discount was around $1000).

Now the tax reform foresees a reduction of 18 percent of these expenses, but the ceiling and the reduction vary according to family obligations.

Therefore, 18% of these limits is equivalent to a reduction that goes from $964 to $2,753.

What are the benefits that a taxpayer can report?

The Tax Administration (SRI) states that family dependents can be parents, a spouse or common-law partner and children up to 21 years of age or with disabilities of any age who do not earn taxable income and support the taxpayer, i.e. the taxpayer.

In the tax reform project, it is added that “in the event that two or more taxpayers have the same family obligations, they can be distributed among them in a discretionary manner, but in no case may two or more taxpayers be considered the same family burden to reduce personal expenses”.

Between $500 and $2,500 less would be paid in income tax under the new tax reform proposed reduction scheme

The government’s proposal for this new structure to reduce family obligations responds to two motives, which it explains in its proposal.