The Federal Supreme Court (STF) has reached a majority decision in a virtual plenary session to uphold the cap on deductions for education expenses under Brazil’s Personal Income Tax (IRPF), currently set at R$ 3,561.50, in accordance with Article 8, II, of Law No. 9,250/1995.
The direct action of unconstitutionality was filed by the Federal Council of the Brazilian Bar Association (OAB), which argued that the deduction cap is “unrealistic” given the actual cost of education in Brazil and that such a limitation disproportionately restricts both the right to education and the taxpayer’s ability to contribute.
However, the prevailing opinion at the STF was that of the rapporteur, Justice Luiz Fux, who found the rule to be constitutional. In his view, the cap does not amount to confiscation and falls within the scope of the legislature’s fiscal policy, balancing taxpayers’ ability to contribute with the public interest in funding public education.
Justice Fux emphasized that allowing unlimited deductions would jeopardize government revenue, potentially undermining the financing of public education and disproportionately benefiting higher-income taxpayers—those who typically have access to private education. “Unlimited deductions would not benefit low-income individuals, who are already exempt from the tax,” he stated.
The Office of the Attorney General (AGU), defending the current rule, also pointed out that lifting the cap would not expand access to education and reiterated that the Judiciary cannot overstep its bounds by nullifying limits established by law in the absence of a new legal framework.
The ruling reflects the STF’s generally “conservative” stance regarding legislative discretion in tax matters, particularly when sensitive fiscal policies and significant budgetary impacts are involved. By upholding the education deduction cap, the Court removes, at least for now, a potential multibillion-real fiscal risk for the federal government and reaffirms its position that setting deductibility limits is primarily the responsibility of Congress.