Estonia

Personal allowances and deductions

Starting from 1 January 2026, the minimum monthly basic allowance was increased to EUR 700 applicable to everybody. The specific progressive allowance system was terminated.

Deductions are allowed for certain personal allowances, as well as certain deductible documented expenses, which fall into two categories.

The first category includes certain mandatory payments, which can be deducted without any limitations, including unemployment insurance contributions, contributions to compulsory accumulative pension scheme, and certain obligatory contributions to foreign social security schemes.

The second category includes deductions that are allowed for tax policy reasons and which have various limitations on deductibility. The second category includes certain educational expenses, certain gifts and donations, and certain payments to personal pension schemes.

A 20% deduction is available for income from renting out immovable property. 20% is an estimate of incurred expenses related to the property; these expenses do not have to be documented.

A non-resident individual of another European Union (EU) or European Economic Area (EEA) member state can make various deductions from one's income proportionally to the Estonian-source income share of their entire taxable income for the period of taxation.

Business deductions

Business deductions can only be made from business income by individuals registered as sole proprietorships. For income tax purposes, sole proprietorships must follow cash basis accounting for their income and expenditure.

Sole proprietors have a right to open a special bank account where they can carry all their business income during the ten days after they have received it. The increase of the amount in that bank account is deducted from the taxable income of the sole proprietor and the decrease of the amount in the account is added to their taxable income.