How to Deduct Income Expenses from the IRS

Having a household displaced student means a much larger expense at the end of each month.

Allowing a child to study at a school far from home forces you to redo all the family budget calculations and to consider new expenses that did not exist until then, including accommodation.

However, since the 2018/2019 academic year, it is possible to deduct the income of the displaced student in the IRS, as part of the education expenses.

But to have access to this benefit, the student must comply with several requirements, one of them being the communication to the Tax and Customs Authority (AT) of their status as “Displaced Student”.

Who can be considered a displaced student?

Not everyone who is studying away from home is entitled to the benefit. For this it is necessary to have under 25 years of age and enrolled in an educational establishment (recognized by the Ministry of Education) located more than 50 kilometers away from the permanent residence of the household.

If any of these rules are not confirmed in your case, it is not worth proceeding with the process, as the Tax Authorities will not grant you the benefit.

How to register on the Finance Portal?

First of all, it is important to know that only the student himself can declare himself as displaced, never someone else. So, the first step, if you haven’t already done so, is to ask for a password to access the Finance Portal in order to register properly.

After logging in to the Finance Portal, you should look for the e-lease section and then choose the option “register displaced student”. In the menu, the lease contract for the house or room registered in the student’s name will automatically appear. You will then have to select the contract and click on “register”.

Note that, at this point, the system will ask you to indicate the period of time during which you will be away from home (it cannot exceed 12 months), as well as the parish in which the household resides. Don’t forget that every year you will have to repeat this procedure.

This is also a way for AT to oblige landlords to register lease contracts with Finance. Without this registration, the student cannot be considered as “displaced” nor will the expense be automatically included in the IRS declaration.

It may even happen that receipts are issued before the student registers on the Portal. In that case, the receipts will be automatically corrected, so as to contain the reference “displaced student”, as soon as he identifies the contract that gave rise to them.

In any case, it is always advisable to keep all proof of rent payment, as well as the lease contract. Thus, in case this expense does not appear at the time of delivery of the IRS, the taxpayer will be able to declare it manually. However, there is a high probability of being called by the Tax Authorities, together with the landlord, to prove the charge.

How much can you deduct in rent?

After duly registered on the Finance Portal, the displaced student can integrate the household income tax return, there is no need to make a separate one.

Families can then deduct from their IRS collection, such as education expenses, 30% of the rent paid by the displaced studentup to one maximum of 300 euros.

In turn, the deduction limit for education expenses, which has a maximum value of 800 euros, goes up to a thousand euros (if those 200 euros of difference are related to the rents).

Let’s take an example:

A student who pays 300 euros in rent, at the end of the year will have an expense of 3600 euros with accommodation (300€ x 12 = 3600€). Since only 30% of each education expense can be deducted from the IRS, only 1080 euros will count towards the declaration (3600€ x 30% = 1080€).

Of these 1080 euros, the AT will consider only 300 euros (the limit for rent expenses) that enter the global amount of 800 euros of education expenses. If this student had no further education expenses to count with the IRS, then he would only deduct those 300 euros.

But if you had already reached 800 euros in deductions for education expenses (with tuition fees, books or school meals, for example), the limit would then increase to 1,000 euros. In this case, the amount corresponding to the rents to be deducted would be a maximum of 200 euros (1000€ – 800€ = 200€).

For students who are enrolled in educational institutions located in the interior or autonomous regions there is, since January 2019, an additional benefit.

In these cases, the supported value by the student with education expenses It is increased by 10 percentage pointswith a maximum ceiling of €1,000 (instead of the usual €800).

This means that, for the same level of expenses, the tax deduction for a student attending a school or university in Évora or Covilhã is higher than that for a student studying in Porto or Coimbra, for example. You can consult the list of areas considered “Inland Territories” in Ordinance No. 208/2017.

In order to take advantage of this benefit, the taxpayers in question must indicate on the Finance Portal the members of the household who attend educational establishments in the interior or autonomous regions, as well as the total amount of expenses incurred.

Please note the following…

Rents relating to accommodation for a displaced student are considered education expenses. That is, they are included in the same pie as expenses with school fees or textbooks, for example, and not in the expenses with real estate.

It is also not possible to deduct income under the category of education expenses and simultaneously as a real estate charge. Also because the deductions are not cumulative.

Article originally published in July 2019. Last updated in January 2023.