New Irpef Brackets

The 2026 Budget Law no. 199/2025 significantly modified the rules governing personal income tax, modifying the structure of the rates set out in Article 11, paragraph 1, letter b) of the Consolidated Law on Income Tax (TUIR).

The legislative intervention is part of a broader process of overhauling the tax system, with the aim of reducing the tax burden on medium- to high-income earners, while respecting the principle of progressivity enshrined in Article 53 of the Italian Constitution.

The reform is divided into two main lines:

• on the one hand, the reduction of the second IRPEF rate from 35% to 33%;
• on the other, the introduction of a mechanism for “sterilizing” the benefit for taxpayers with a total income above €200,000.

The combination of the two measures allows for a reduction in the tax burden for a broad range of taxpayers, while avoiding regressive effects in favor of higher incomes.

♦ The New IRPEF Tax Rate Structure from 2026

Starting from the 2026 tax period, the IRPEF tax rate structure is as follows:

• 23% for incomes up to €28,000;
• 33% for incomes from €28,001 to €50,000 (previously 35%);
• 43% for incomes above €50,000.

The change affects only the second bracket, which is reduced by two percentage points. This measure results in a tax relief for all taxpayers with incomes above €28,000, regardless of their total income.

Since the maximum size of the relevant bracket is equal to €22,000 (50,000 – 28,000), the maximum theoretical benefit obtainable is equal to: €22,000 × 2% = €440 per year.

This represents the maximum savings that each taxpayer can achieve because of the reduction in the rate.

♦ Effects of Reduction: Application Examples

To better understand the impact of the reform, it is worth examining some practical hypotheses.

A taxpayer with a total income of €30,000 will see the new 33% rate applied only to the portion exceeding €28,000, i.e., €2,000. The saving will therefore be €40 per year (2,000 × 2%).

For an income of €40,000, the portion subject to the second tax rate is €12,000. The benefit will therefore be €240 per year.

A taxpayer with an income of €50,000 or more receives the maximum benefit of €440, as the entire €22,000 bracket benefits from the rate reduction.

It follows that the intervention produces a progressively increasing effect until the maximum ceiling is reached.

♦ The Sterilization Mechanism for Incomes Over €200,000

Alongside the rate reduction, the Budget Law introduces a corrective measure aimed at neutralizing the benefit for taxpayers with greater taxpaying capacity.

Article 1, paragraph 4, in fact intervenes on Article 16-ter of the TUIR by providing, for individuals with a total income exceeding €200,000, a flat-rate reduction in tax deductions equal to €440.

The maximum benefit obtainable thanks to the reduction in the rate (equal to €440) is fully offset by a corresponding reduction in the applicable deductions.

In practical terms, a taxpayer with an income of €230,000 initially benefits from the lower IRPEF resulting from the 33% rate but subsequently experiences a reduction in deductions by the same amount. The net effect is therefore zero.

The law thus achieves a true “sterilization” of the tax benefit above the €200,000 threshold, maintaining the redistributive balance of the system.

♦ Objective Scope of the Reduction of Deductions

The flat-rate reduction of €440 does not apply to all deductions without distinction, but concerns specific categories of expenses.

In particular, the following are concerned:

1. the 19% deductions provided for by Article 15 of the TUIR (interest on mortgages, funeral expenses, education expenses, sports expenses for children, etc.);
2. liberal donations to political parties, for which a 26% tax deduction is provided;
3. insurance premiums against the risk of catastrophic events relating to residential properties.

The deduction for healthcare expenses pursuant to Article 15, paragraph 1, letter c) of the TUIR is expressly excluded from the reduction, but remains fully available even to taxpayers with incomes above €200,000.

The legislator’s choice appears to be oriented towards preserving the deductions with the greatest social value, particularly those related to health protection.

♦ Coordination With the Principle of Progressivity

The legislative intervention must be read in light of Article 53 of the Constitution of the Italian Republic, which requires the tax system to be progressive.

A general tax rate reduction, applied without adjustments, could have resulted in a proportionally significant benefit even for very high incomes. Sterilization avoids this effect by ensuring that the tax relief applies exclusively to incomes up to €200,000.

From a systematic perspective, the reform represents a balancing act: it reduces the tax burden in the central income bracket, but keeps the effective contributions of those with the greatest tax capacity unchanged.

♦ Effective date and operational profiles

The new provisions apply starting from the 2026 tax period and will be implemented in tax returns filed in 2027.

During the year, withholding agents will have to adjust their withholding tax calculations to the new 33% rate.

For professional studies it is necessary:

1. update the declarative software;
2. carefully check the €200,000 threshold during the consultancy;
3. provide adequate information to interested customers.

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Don’t hesitate to contact us for further information or to receive support in complying with the new regulatory provisions.

Best regards,

Sara Razzi

This newsletter is the result of a collaboration between artificial intelligence and human expertise, with review and editorial care by Sara Razzi.