Deduction of Health Expenses in IRS 2026: Complete Guide and Strategies for Tax Maximisation

The deduction for health expenses in IRS 2026 is 15% of eligible expenses, up to a maximum limit of €1,000 per household, as stipulated by Article 78-C of the Personal Income Tax Code (CIRS). This tax benefit aims to alleviate the financial burden associated with healthcare, encouraging taxpayers to safeguard their health and well-being.

A correct understanding of the deduction rules is fundamental for taxpayers to optimise their IRS settlement, ensuring that all eligible expenses are duly considered. This detailed guide will cover the crucial aspects of health expense deduction, from identifying eligible expenses to strategies for avoiding common errors and maximising refunds or reducing tax payable.

1. Legal Framework and General Principles of Health Expense Deduction

The deduction of health expenses in IRS finds its main legal support in Article 78-C of the CIRS, which establishes the conditions and limits for its application. This article, titled "Deduction from tax payable for health expenses," is the cornerstone for understanding this tax benefit.

1.1. Percentage and Limit of Deduction

As mentioned, the deduction corresponds to 15% of the value of health expenses incurred and communicated to the Tax and Customs Authority (AT), with a maximum limit of €1,000 per household. It is crucial to note that this limit is global for the household, regardless of the number of members it comprises. For example, a household with two taxpayers and one dependent will have the same €1,000 limit as a household with only one taxpayer.

1.2. Nature of Eligible Expenses

Health expenses that can be deducted are those aimed at the prevention, treatment, and rehabilitation of health. The CIRS specifies that health expenses are considered to be charges for goods and services exempt from VAT or subject to the reduced VAT rate, when duly proven. This distinction is important, as not all health-related expenses fall within these criteria. VAT exemption for health services is provided for in Article 9 of the Value Added Tax Code (CIVA), which exempts, among others, services rendered in the exercise of medical and paramedical professions.

1.3. The Role of e-Fatura

The communication of health expenses to the AT is mainly carried out through the e-Fatura system. It is essential that, when acquiring health goods or services, the tax identification number (NIF) of the taxpayer or a member of their household is included in the invoice. Subsequently, these invoices are automatically communicated by service providers to the AT and are available for consultation and validation on the e-Fatura portal. Correct classification and validation of these invoices is a critical step in the deduction process.

2. Eligible and Non-Eligible Expenses: A Detailed Look

The distinction between what can and cannot be deducted is often the greatest source of confusion for taxpayers. A strict interpretation of the law and AT guidelines is essential.

2.1. Medical and Hospital Expenses

• Medical consultations: Include general and family medicine consultations, medical specialties (cardiology, gynaecology, paediatrics, etc.), dental medicine, psychology, and psychiatry.
• Tests and analyses: All complementary diagnostic tests (X-rays, ultrasounds, clinical analyses, magnetic resonances, CT scans, etc.).
• Hospitalisations and surgeries: Expenses for hospitalisations, operating theatres, anaesthetics, and surgical procedures.
• Physiotherapy and rehabilitation: Physiotherapy, osteopathy, chiropractic, and other rehabilitation therapies prescribed by healthcare professionals.
• Nursing services: Home nursing care or in clinics.
• Ambulance: Costs for ambulance transport in emergency situations or for treatments.

2.2. Medicines and Pharmaceutical Products

• Prescription medicines: Only medicines subject to medical prescription and invoiced with NIF can be deducted. It is crucial that the invoice clearly itemises the purchase of medicines.
• Food supplements: Are only eligible if prescribed by a doctor or nutritionist and their acquisition is duly invoiced and justified as part of a health treatment. This is an area of particular attention, as many supplements are purchased without prescription and are not deductible.

2.3. Medical Devices and Prostheses

• Prostheses: Include dental, orthopaedic, and other prostheses aimed at replacing or complementing organic functions.
• Orthoses: Corrective or support devices (e.g., orthoses for feet, knees).
• Prescription glasses and contact lenses: Are only deductible if prescribed by an ophthalmologist and the invoice identifies them as a medical device (reduced VAT rate). Frames alone, without prescription lenses, may not be fully considered.
• Hearing aids: Devices for correcting hearing problems.
• Wheelchairs and other support equipment: Provided they are prescribed and invoiced as medical devices.

2.4. Health Insurance

Expenses for health insurance premiums or contributions to mutual aid associations that exclusively cover health risks are also deductible at 15% of their value, with the same maximum limit of €1,000 for the household. It is important that the insurance is exclusively for health. If the insurance is mixed (health and life, for example), only the part corresponding to health coverage is deductible, and the insurer must itemise this portion in the annual statement.

2.5. Non-Eligible Expenses (Examples)

• Non-prescription medicines (over-the-counter medicines).
• Personal hygiene products (toothpastes, special shampoos, etc.), even if purchased in pharmacies.
• Cosmetics and beauty products, even if they have some "healthy" component.
• Dietary foods and beverages, unless prescribed and invoiced as part of a specific treatment and with a reduced VAT rate (very rare).
• Travel expenses for consultations or treatments, unless they fall into very specific ambulance transport situations.
• Life insurance that includes only a small health component, without clear itemisation of the health premium.

3. The e-Fatura Process and Its Importance

The e-Fatura system is the pillar of expense communication to the Tax Authority. Its correct use and validation are crucial to ensure the deduction of health expenses.

3.1. Inclusion of NIF on the Invoice

Whenever a health good or service is acquired, it is imperative to request an invoice with the NIF of the taxpayer or, if applicable, of one of the members of the household. Without the NIF, the invoice will not be communicated to the AT and, consequently, the expense cannot be considered for deduction purposes.

3.2. Automatic and Manual Classification

After the invoice is communicated by the merchant or service provider, expenses appear pre-classified on the e-Fatura portal. The AT, through algorithms, attempts to categorise each expense. However, this automatic classification can sometimes be incorrect. It is common for pharmacy invoices, for example, to include both prescription medicines and hygiene products or over-the-counter medicines. In these cases, the invoice may appear as "Other" or with a generic classification.

3.3. Validation and Category Change in e-Fatura

The taxpayer is responsible for accessing the e-Fatura portal (available at e-fatura.pt) and validating their invoices. The deadline for this validation is generally until February 25 of the year following the expenses (for example, 2025 expenses must be validated by February 25, 2026). During this period, the taxpayer must:

• Verify that all invoices with NIF have been communicated.
• Confirm the automatically assigned classification.
• Change the classification of invoices that are incorrectly categorised. If a pharmacy invoice includes prescription medicines and other products, the taxpayer must associate the invoice with the health category and indicate the eligible amount. It is crucial to keep detailed purchase receipts to justify the percentage of health expense, should proof be requested.
• Associate pending invoices with a category (e.g., "Health").

Failure to validate or incorrect classification of invoices can result in the loss of the right to deduct eligible expenses.

4. Dependents and Household: Specific Rules

Portuguese tax legislation considers the household as the unit for the purpose of many deductions, including health expenses. Understanding how dependents fit into this context is fundamental.

4.1. Scope of Expenses

Health expenses incurred by any member of the household (taxpayers and dependents) are aggregated for deduction purposes. The maximum limit of €1,000 applies to the total health expenses of the household, regardless of who incurred them.

4.2. Definition of Dependent

According to Article 13 of the CIRS, dependents for tax purposes are considered to be unemancipated minor children, stepchildren, adopted children, and civil godchildren, as well as adult children, stepchildren, adopted children, and civil godchildren who do not earn income exceeding the national minimum wage and who are students or are unfit for work. Other specific situations may also be considered, such as ascendants living in cohabitation and not earning income exceeding the minimum pension of the general scheme.

4.3. Household

The composition of the household is declared at the beginning of each tax year and is crucial for the correct application of deductions. Changes in the composition of the household (birth, marriage, divorce, death) must be communicated to the AT, as they may impact applicable deductions.

5. Practical Examples of Calculation and Maximisation

To clarify the application of the rules, we present some practical examples.

Example 1: Household with Expenses Below the Limit

• Household Composition: Couple with one dependent child.
• Eligible Health Expenses (annual total):
  • Medical consultations (family): €800
  • Prescription medicines (child): €200
  • Health insurance (couple): €500
  • Prescription glasses (one taxpayer): €300
• Total Eligible Expenses: €800 + €200 + €500 + €300 = €1,800
• Deduction Calculation: 15% of €1,800 = €270
• Applicable Deduction: €270 (does not reach the household limit of €1,000)

In this case, the deduction from IRS payable is €270.

Example 2: Household with Expenses Above the Limit

• Household Composition: Couple with two dependent children.
• Eligible Health Expenses (annual total):
  • Medical consultations and tests (family): €2,500
  • Hospitalisation and surgery (one taxpayer): €4,000
  • Prescription medicines (children): €500
  • Health insurance (entire family): €1,500
• Total Eligible Expenses: €2,500 + €4,000 + €500 + €1,500 = €8,500
• Deduction Calculation: 15% of €8,500 = €1,275
• Applicable Deduction: €1,000 (reaches the established maximum limit)

In this scenario, although 15% of eligible expenses amount to €1,275, the maximum permitted deduction is €1,000.

Example 3: Single Taxpayer with Sickness Benefit

• Household Composition: Single taxpayer.
• Eligible Health Expenses (annual total):
  • Dental consultations and treatments: €1,200
  • Physiotherapy: €600
• Total Eligible Expenses: €1,200 + €600 = €1,800
• Deduction Calculation: 15% of €1,800 = €270
• Applicable Deduction: €270 (does not reach the limit of €1,000)

Even as a single taxpayer, the €1,000 limit is the same, and the deduction is calculated based on eligible expenses.

6. Common Errors to Avoid in Health Expense Deduction

Despite the apparent simplicity of the rules, many taxpayers make errors that can lead to the loss of deductions or future corrections by the AT.

6.1. Not Requesting an Invoice with NIF

This is perhaps the most basic and common error. Without the NIF on the invoice, the expense is not communicated to the AT and, consequently, cannot be considered for deduction.

6.2. Not Validating Invoices in e-Fatura

Even with an NIF, if invoices are not validated or if their classification is not corrected on the e-Fatura portal by the deadline (February 25), the AT may not consider them as health expenses. It is essential to review all invoices and ensure they are correctly associated with the "Health" category, or that the health expense portion is duly itemised.

6.3. Including Non-Eligible Expenses

Attempting to deduct hygiene products, cosmetics, non-prescription medicines, or food supplements without explicit medical prescription and an itemised invoice is an error. The AT may later request proof and, if not provided, reverse the deduction, which may involve the payment of additional tax and interest.

6.4. Not Keeping Proof

Although the e-Fatura system automates much of the process, it is crucial to keep the original invoices and, in particular, medical prescriptions or prescriptions justifying the purchase of medicines, supplements, or prescription glasses. The AT may, at any time, request these documents to prove the eligibility of expenses.

6.5. Confusing the Household Limit with the Individual Limit

The €1,000 limit is for the household, not for each member. Some taxpayers may mistakenly believe that each taxpayer or dependent is entitled to an individual limit, which is not the reality.

6.6. Not Communicating Changes in the Household

Changes in the composition of the household (birth of a child, marriage, divorce, etc.) must be communicated to the AT through the Tax Portal. Failure to communicate can affect the correct application of deductions and tax benefits.

6.7. Not Checking Itemisation in Mixed Invoices

Invoices from pharmacies, opticians, or even health insurance can include eligible and non-eligible items. It is the taxpayer's responsibility to ensure that only the eligible portion is considered. In the case of insurance, the insurer must provide an annual statement itemising the health premium.

7. Conclusion and Practical Recommendations

The deduction of health expenses is a significant tax benefit that can have a considerable impact on the IRS settlement. However, its correct application requires attention to detail and proactive monitoring by the taxpayer.

7.1. Key Recommendations

• Always Request an Invoice with NIF: This is the first and most important step. Without an NIF, there is no deduction.
• Validate and Classify Invoices Regularly: Do not leave it until the last minute. Access the e-Fatura portal regularly and validate your invoices, correcting classifications when necessary. Ideally, do so monthly or quarterly.
• Keep Proof: Maintain an organised physical or digital file of all health invoices, medical prescriptions, and other supporting documents for a minimum period of 4 years, which is the statute of limitations for the right to assessment and review of tax, as per Article 45 of the General Tax Law (LGT).
• Know the Rules: Familiarise yourself with the list of eligible and non-eligible expenses to avoid errors and optimise your deductions.
• Pay Attention to Deadlines: Comply with the established deadlines for invoice validation and submission of the IRS declaration.
• Consult Professionals: In case of complex doubts, consider consulting a certified accountant or a tax specialist.

7.2. Maximising the Tax Benefit

Maximising the deduction of health expenses requires rigorous and careful management of expenses throughout the year. By ensuring that all eligible expenses are correctly invoiced, communicated, and validated, taxpayers can ensure they fully benefit from the €1,000 limit per household, contributing to a lower annual tax burden.

7.3. Call to Action

Do not leave your deductions to chance! Access the e-Fatura portal today, check the status of your invoices, and ensure that all health expenses of your household are duly registered and classified. For more information or to clarify specific doubts, consult the official pages of the Tax and Customs Authority or seek professional advice.

8. Sources and Legal References

The information contained in this article is based on current Portuguese tax legislation, namely:

• Article 78-C of the Personal Income Tax Code (CIRS): Establishes the rules for the deduction from tax payable for health expenses.
• Article 13 of the Personal Income Tax Code (CIRS): Defines the concept of dependent for tax purposes.
• Article 9 of the Value Added Tax Code (CIVA): Provides for VAT exemptions for certain services and supplies of goods, including those in the health sector.
• Article 45 of the General Tax Law (LGT): Defines the statute of limitations for the right to assessment and review of tax.
• e-Fatura Portal: https://www.e-fatura.pt
• Tax Portal: https://www.portaldasfinancas.gov.pt