How to legally lower your IRPF: deductions explained

“How do I pay less?” is one of the most-searched questions. IRPF does have legal ways to lower what you pay, but it pays to understand them well — especially because personal deductions don't work the way most people think.

Two ways to count your expenses

If you work on your own (personal services), your work income is calculated first. You have two routes: the ficto, where the law recognises 30% of your income as expenses with no receipts; or the real one, where you subtract your actual expenses but need formal accounting. Most independents use the 30% ficto for simplicity. The law puts it this way:

On calculating work income, the law states:

«se deducirá del monto total de los ingresos un 30% (treinta por ciento) en concepto de gastos, más los créditos incobrables»

In English: 30% (thirty percent) of the total income shall be deducted as expenses, plus uncollectible credits.

Personal deductions are a credit, not a discount

Here's the part that confuses everyone. Personal deductions (contributions, children, housing) are not subtracted one-for-one from your income. They're added up, and a rate is applied to that total: 14% if your annual income is at or below 180 BPC, and 8% otherwise. That result is a credit subtracted from the tax. In plain words: $100 of deductions doesn't save you $100, it saves you $14 (or $8).

What you can deduct

The most common admitted personal deductions for an independent worker are:

• Your pension contributions to BPS (and the professional/notarial funds if applicable).
• Your personal contributions to FONASA (health) and the Labour Reconversion Fund.
• A fixed amount per dependent child (double if the child has a disability).
• Mortgage interest on your single home (with an annual cap).

On the amount per dependent child, the DGI states:

«20 BPC anuales por cada hijo menor de edad a cargo»

In English: 20 BPC per year for each dependent minor child.

An honest example

Picture an independent with mid-range income and one dependent child. The 30% ficto already lowers the work income. Their contributions and the per-child amount form deductions, but remember: they're valued at 14% (or 8%). So the benefit is real, but partial — it isn't a full discount. Understanding this avoids surprises at filing time.

Deductions at a glance

In short: the 30% ficto lowers your income with no paperwork, and personal deductions give you a credit valued at 14% or 8% — a real but partial benefit. Knowing them helps you avoid overpaying and avoid over-expecting. Always verify the current values with the DGI before you file.