Independent workers across Costa Rica will soon have a simpler way to handle their income taxes. Starting January 1, 2026, a reform to the Income Tax Law lets them deduct 25% of their gross income without needing receipts or other proof. This change, part of Law No. 10667 approved earlier this year, aims to cut down on paperwork and make tax filing easier for self-employed people.
The option applies to professionals like lawyers, accountants, and consultants, as well as technicians, personal service providers such as plumbers and carpenters, sales agents, commission agents, and insurance agents who operate without an employer-employee relationship. These workers can choose between this flat 25% deduction or listing out their actual expenses with supporting documents, whichever lowers their tax bill more.
To qualify, individuals must report their earnings as coming from these independent activities. The reform does not cover salaried employees or other types of businesses. For those who pick the flat rate, it subtracts directly from gross income, reducing the amount subject to tax. This setup gives flexibility, especially for people whose costs are hard to track or document fully.
Alongside the deduction, the law raises the tax-exempt income threshold for independent workers. Annual earnings below ₡6,244,000 – up from ₡4,094,000 in 2025 – face no income tax at all. This increase, tied to economic adjustments, means many lower-earning independents could pay nothing if their income stays under that limit. For those above it, taxes apply on the excess, with rates starting at 10% and scaling up based on brackets.
Freelancers stand to benefit directly from these rules. A graphic designer or writer working remotely, for example, might find the 25% deduction covers typical costs like internet or home office setup without the hassle of saving every invoice. This could trim their taxable income noticeably, leaving more money in their pockets after filing.
Digital nomads registered as residents in Costa Rica also see advantages here. Many in this group earn from international clients while based locally, and qualifying as independent workers lets them use the flat deduction. If their annual income falls below the new exempt threshold, they avoid taxes entirely on that portion. Higher earners might save by opting for the 25% cut instead of proving smaller expenses, but they need to compare both methods to decide.
Self-employed expats who have set up in Costa Rica face similar shifts. Those running small operations, like consultants or artisans, could experience a lighter tax load if they meet the criteria. Registration with the tax authority as an independent worker is key, and the reform encourages more people to formalize their status to access these perks. Expats should check their residency and activity classification to confirm eligibility, as the rules target specific service-based roles.
Tax experts note that this reform promotes compliance by reducing barriers. “It simplifies things for independents who struggle with records,” said a finance ministry spokesperson in a recent statement. Workers can still deduct more than 25% if they have proof of higher costs, but the flat rate serves as a safety net for those without detailed tracking.
For context, Costa Rica’s income tax system taxes net income after deductions. The 2026 brackets, adjusted for a slight deflation of -0.38%, start with 10% on income up to ₡8,329,000, then 15% up to ₡10,414,000, and higher rates beyond. Independent workers calculate their tax on the net after applying the chosen deduction.
This change comes at a time when more people turn to self-employment amid economic shifts. Freelancers and nomads drawn to Costa Rica’s lifestyle often cite taxes as a factor in their decisions. With the new rules, the country positions itself as friendlier to these groups, potentially boosting registrations and revenue through broader participation.
Independent workers should review their 2025 filings to prepare for the switch. Consulting a tax advisor helps ensure they apply the rules correctly and maximize savings. As the deadline approaches, the finance ministry plans to release more guidance on how to elect the deduction option during annual declarations.
In summary, the 2026 reform offers practical relief for independents by allowing a no-proof 25% deduction and a higher exempt threshold. Freelancers, digital nomads, and self-employed expats registered here may find their tax obligations reduced, but staying informed on the details remains essential to avoid surprises.
