Charitable Income Tax: how to give back to the community through your annual return

Citizens can donate up to 6% of their income tax towards social causes free of charge through their annual returns

In a press conference held to disclose the rules for the 2023 Income Tax season, the Federal Revenue Service highlighted its grantmaking campaign to encourage donations towards social and cultural projects through the individual income tax return.

But do you know how to make charitable donations and contribute towards a cause or organization by using your annual income tax without spending a dime? Learn more about this below:

What is Income Tax Destination?

This is a lawful and safe way of promoting social and cultural projects by assigning a portion of the amount collected from your income tax to a cause of your choice.

What causes can I support?

You can make contributions directly from your Income Tax Return towards:

• Funds for the rights of children and adolescents (FDCA);
• Funds for the Rights of Senior Citizens (FDPI).

Donations to those funds can be further narrowed down at the national, state and local levels.

Will I have to pay more taxes if I make a donation? Will my refunds be deducted?

No. The taxpayer will not bear any costs. Amounts are deducted from the income tax due by those who are already legally required to pay it. In the case of tax refunds, donated amounts are added to the refunds, adjusted to the SELIC interest rate.

Who is eligible to donate to those projects using a tax return?

Taxpayers who have elected to file their tax returns under the legal deductions system (full form) are eligible to choose where to assign portions of their income tax.

The option for deduction does not apply to individuals who file their returns using the simplified discount system and is not valid for late submissions.

How much can I donate from my income tax?

Up to 6% of your tax due can be given out. You can use your tax return to allocate up to 3% of your income tax to funds for the protection of children and adolescents, and a further 3% towards funds for the protection of senior citizens.

How do I assign a destination for my tax in my return?

1. When filling out your tax return, click on the tab that reads “Donations Directly from the Tax Return” (‘Doações Diretamente na Declaração’).

2. The program will perform an automatic calculation of the amounts eligible for donation, either by reducing the taxes payable or by increasing your refund.

3. Choose the fund that shall receive your donation and print the Federal Revenue payment bill (DARF).

If you choose to donate straight from your tax return, the program will generate the DARF bills for you to pay the taxes due and make the donations. The DARF for the donations must be paid by May 31, within the deadline for filing the tax return. Failure to make the payment will result in the rejection of the amount outstanding, and the taxpayer will be required to pay the difference in tax - which corresponds to the amount donated plus penalties and interest.

Source: Federal Revenue Service

Learn about another way to donate to funds

The instructions above are focused on donations made directly from tax returns, but you can also make donations over the course of the year and schedule them to be deducted in the following year.

For instance, if someone made a charitable gift in 2022, the receipts issued by the fund must be stated in the taxpayer’s 2023 income tax return so that he or she is eligible for a tax offset this year. It should be noted that this is only valid for projects that have been previously approved by the Government.

Through this scheme, in addition to the possibility of donating towards funds for the rights of the children, the youth and seniors, one can also support efforts that foster cultural projects, the film industry, healthcare and sports activities*.

*As of January 1, 2023 and until 2027, sports activities will be eligible for a deduction of up to 7% of the income tax due, keeping in mind that the overall limit in place for allocation towards other causes stands at 6%.

Support for individuals

Domingues e Pinho Contadores has a department focused on individual taxpayers which guides clients through every step of filing their income tax returns. You can count on our support to adopt the best practices to comply with this requirement: dpc@dpc.com.br.