Employees are not entitled to deduct business-related expenses from their employment income.
However, independent workers are able to. Independent workers can choose to be treated as employees for income tax purposes (procedure and tax reliefs).
If the choose to be treated as independent (rather than employees), they are able to claim costs and deductions deemed as 60% of their gross income.
Some donations are allowed as discounts, provided they are made to certain institutions dedicated to development of health, education, culture, religion, sports, scientific and technological research, ecology and the protection of the environment, or to social development programs of general interest. Most of these donations are limited with respect to their deduction.
Mortgage interest deduction
For mortgage interest paid in Colombia, up to a maximum of COP 50,894,000 for FY 2023 (TU 1,200) is deductible annually.
Healthcare payments (i.e. payments to companies who offer prepaid health and are monitored by the national health superintendent, payments for health insurance to insurance companies that are monitored by the financial superintendent) for the taxpayer, spouse, and children are deductible up to a maximum of COP 679,000 (TU 16) monthly, an equivalent of COP 8,143,000 annually.
Note that the amount paid by the employee to the mandatory health system (described in the Other taxes section) is deemed as non-taxable income (different from deductions).
For dependant deduction, the deductible limit is 10% of gross labour income until a maximum of COP 1,357,000 (TU 32) monthly, an equivalent of COP 16,286,000 annually.
Dependants are defined as:
- Children of the taxpayer until 18 years old.
- Children of the taxpayer between 18 and 23 years old who are studying in education institutions.
- Children of the taxpayer older than 23 years who have psychological and physical dependence.
- Spouse or living partner who has a psychological, physical, or economic dependence.
- Parents or siblings of the taxpayer who have a psychological, physical, or economic dependence.
, employees are able to deduct 72 TU for each dependant up to 4 dependants.
Interests paid on educational loans
Law 2010 of 2019 introduced a deduction for interests paid on educational loans granted by the Government Education Entity ICETEX. This deduction applies while the education loan is for the taxpayer’s higher education and it is capped to TVU 100 annually (COP 4,241,000 for FY 2023).
There are no personal allowances in Colombia.