Panama Tax Deductions and Benefits: Pay Less Legally in 2026

Last reviewed: November 2026 · Reviewed by Stéphane Gombauld, tax expert, technologist and digital nomad

You earn some income in Panama – a local contract, rent, a salary – and want to pay what you owe, not more. This guide lists the personal deductions and benefits that exist in 2026, who can use them, and how much they actually save you.

Panama personal deductions and benefits in 2026: the key figures

Is this guide for you?

Read on if you…

• are a Panamanian tax resident with Panamanian-source income (salary, local clients, rent);
• own or plan to buy a home in Panama with a mortgage;
• are a retiree or plan to apply for the Pensionado visa.

Probably not your case if you…

• earn only foreign income – it is not taxed, so deductions have nothing to reduce;
• are a non-resident: deductions are generally available only to residents filing a return.

Which personal deductions can you claim in Panama?

Panama's personal deductions sit in article 709 of the Fiscal Code. They reduce taxable income, so they save you money at your marginal rate: 15% or 25%.

The main deductions

1. Mortgage interest on your main home. Interest on a loan from a Panamanian bank to buy, build or improve your primary residence, up to USD 15,000 a year.
2. Education loan interest. Interest on loans from local institutions to pay for your or your dependants' studies.
3. Education costs for dependants. School and university fees paid in Panama, within an annual cap.
4. Medical and hospital costs. Expenses paid in Panama and not reimbursed by insurance, for you, your spouse and dependants.
5. Private pension and retirement plans. Contributions to registered Panamanian pension or retirement savings plans, within a cap.
6. Donations. Gifts to charities registered with the Ministry of Economy and Finance, within a cap.

Keep every receipt with the provider's RUC (tax number). Without it, the DGI can refuse the deduction.

Who can use them?

Deductions apply in your annual return, due 15 March. Employees with a single Panamanian employer often do not file, so they miss deductions unless they file voluntarily.

How much do deductions really save you?

Here's the catch. Most deductions only help if your Panamanian-source income is above USD 11,000. Below that, you are already at 0%.

So a resident earning USD 70,000 from a Panamanian employer and paying USD 12,000 of mortgage interest saves USD 3,000. The same deduction saves nothing for a remote worker paid from abroad.

What other benefits do residents get?

Some of Panama's most valuable perks are not income tax deductions at all.

Pensionado benefits

Holders of the Pensionado visa, and Panamanian retirees, get legal discounts under Law 6 of 1987: around 25% off restaurants, 50% off cinemas and shows, 25% off domestic flights and reductions on medical bills and some utilities. New Pensionado residents can also import household goods duty-free up to USD 10,000, once.

Property tax relief on your home

Your primary home registered as such is exempt from annual property tax up to a value of USD 120,000. Above that, progressive rates apply. Register the home as your vivienda principal with the ANATI cadastre and the DGI to get the lower rates.

Foreign income and pensions

Foreign pensions, salaries and investment income are foreign-source and untaxed. That is the largest benefit Panama offers, and it applies whether you are resident or not. See how it fits with the special visas in our Panama tax incentives for expats and digital nomads guide.

Residents vs non-residents

Non-residents are taxed by withholding on Panamanian-source payments. They do not get the zero band or personal deductions. If you plan to leave, read our guide to ceasing Panama tax residency: Panama has no exit tax, but you lose these reliefs on local income.

Running your own business? Business costs follow different rules – see business expenses in Panama.

Common mistakes (and what they cost)

• Not filing because the employer withholds → you lose deductions worth hundreds or thousands of dollars a year.
• Keeping receipts without the provider's RUC → the DGI rejects the deduction on review, with surcharges on the extra tax.
• Paying medical bills abroad and deducting them → only costs paid in Panama qualify, so the claim fails.
• Not registering your home as primary residence → you pay property tax at the higher rate for non-primary homes.
• Expecting deductions to cut tax on foreign income → foreign income is untaxed already, so you waste effort and fees.

Frequently asked questions

Does Panama have a personal allowance?

Not as a separate allowance. The scale itself starts with a 0% band on the first USD 11,000 of taxable income, which works like an allowance. Above that, 15% applies up to USD 50,000 and 25% beyond. Married couples who file jointly may also get a small basic deduction.

Can I deduct mortgage interest in Panama?

Yes, if you are resident and the loan is from a Panamanian bank for your primary home. Interest is deductible up to USD 15,000 a year. Keep the bank's annual interest certificate and make sure the property is registered as your main residence. Interest on rental or holiday properties follows business rules instead.

Are foreign pensions taxed in Panama?

No. Pensions paid from abroad are foreign-source income and are not taxed in Panama, whether you are resident or not. That is why the Pensionado visa is popular. Your pension may still be taxed in the paying country, depending on its rules and any tax treaty with Panama.

What discounts do Pensionado visa holders get?

Holders get legal discounts on many everyday costs, including restaurants, entertainment, domestic flights, hotels, medical consultations and some utility bills. Percentages are set by law and range from about 10% to 50%. They also get a one-time duty exemption on household goods. Check current percentages before relying on them.

Can non-residents claim deductions in Panama?

Generally no. Non-residents are taxed on Panamanian-source income through withholding, usually on gross amounts, without the 0% band or personal deductions. If you have significant Panamanian income, being resident and filing a return can lower your bill, especially with mortgage or medical costs.

When is the Panamanian personal tax return due?

The return covers the calendar year and is due by 15 March of the following year. For 2026 income, that means 15 March 2027. Tax due is paid with the return, and estimated payments may be required for the next year if you have business or professional income.

Related guides

• Panama tax incentives for expats and digital nomads
• Business expenses in Panama
• Panama tax residency rules
• Panama tax landscape overview
• Personal tax deductions and benefits in Paraguay
• Personal tax deductions and benefits in Mexico
• All country tax guides

Sources

• Dirección General de Ingresos (DGI) – Panama tax authority
• Ministerio de Economía y Finanzas de Panamá
• Gaceta Oficial de Panamá – official gazette
• Autoridad Nacional de Administración de Tierras (ANATI)
• Servicio Nacional de Migración de Panamá
• PwC Worldwide Tax Summaries – Panama (secondary cross-check)

This guide is general information, not personalised tax advice. See how we research and review.