This year brings with it important changes in the income tax return that all taxpayers should know to optimize their tax situationsince they will directly impact the personal economy of citizens.
The main changes in the income tax return are due to the tax reform driven by the Government, Designed to limit tax benefits for both legal and natural personswith the aim of increasing national tax collection. This shows that the opportunities for employees to optimize their taxes have been considerably reduced.
There are five key criteria that determine whether a taxpayer must file an income tax return in 2024. By fulfilling just one of them, the tax obligation is activated.These criteria include having a gross net worth of more than 211,793,000 pesos, gross income greater than 65,891,000 pesos, making purchases or consumption that exceed this same amount, higher credit card consumption, or having received bank deposits, deposits or investments above 65,891,000 pesos.
(You can read: Tips to ensure that your CDT does not become a headache when filing your income tax return).
Income tax return
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“Among the most significant changes is the reduction in the limitations on exempt income and deductions that taxpayers, natural persons, can apply, decreasing from 237,208,000 pesos (5,040 UVT) to only 63,067,000 (1,340 UVT) annually. This implies that contributions made to AFC, interest on mortgage loans, payments to prepaid medicine and the 25% exempt income are limited to a total maximum of 63,067,000 pesos annually, which represents a significant restriction that will increase tax payments in income tax returns in accordance with this tax reform.“, he said Nicole Ríos, associate director of CMS Rodríguez-Azuero, in the area of Tax and Customs Law and Foreign Trade.
In addition, they have been introduced new rules and benefitssuch as the possibility of discount 1% of the value of purchases supported by electronic invoice and the ability to deduct more than one economic dependent. Although these measures are positive, their impact on the effective reduction of the tax burden for taxpayers is limited.
(Besides: How to register for the RUT online if you have to file your income tax return this year).
The inflationaveraging 7-8%, further complicates the tax situation, Adding to the restrictions on deductions that reach up to 74% for expenses such as mortgage loans and prepaid medicinewhich significantly reduces the tax relief strategies available to taxpayers.
Income tax return
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Nicole Ríos offers some general recommendations: “The first step is to plan ahead and ask your tax advisor to project your tax return for next year under the current rules to determine the potential increase in income tax. Secondly, especially for wage earners, it is crucial to understand that proper tax withholding planning will be essential to avoid surprises when filing your tax return.“.
(You may be interested in: Income tax return: amounts, terms and dates to keep in mind).
Salaried employees have the option to select the method by which their employer calculates the withholding tax, as well as being able to choose which tax optimization strategies to apply monthly, such as contributions to AFC accounts either voluntary pension fundsamong other strategies.
In many cases, taxpayers use these schemes believing that they will reduce their tax burden when filing their income tax return, but many of these contributions end up not being recognized due to the limitations introduced by the recent tax reform to exempt income and deductions that taxpayers can apply, which results in the loss of initially expected tax benefits.
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