Unreimbursed items (e.g. moving expenses, business-connected travel expenses, business entertainment expenses) are not deductible against the employee's compensation income.
Interest paid on mortgage loans for homes or for home improvements on residences located in Panama is deductible, up to a maximum of USD 15,000 annually, provided the interest payment is not classified as preferential interest for new homes.
Interest paid on loans for financing education is deductible if duly supported.
Medical expenses are deductible, provided they were incurred in Panama and are duly documented.
From January 2019, educational expenses are deductible up to USD 3,600 per student. A special ruling is still pending.
Donations to local educational and charitable institutions are deductible, provided the deductions are authorised by the law establishing such institutions or by the Income Tax Department. Dues paid to non-profit associations or organisations in Panama are also deductible expenses. The maximum deduction allowed is USD 50,000 annually.
Retirement fund contributions
The contributions to retirement funds are considered deductible up to USD 15,000.
An individual who is married is entitled to a personal exemption of USD 800.