Italy Income Tax (IRPEF) Explained 2026: Brackets, Credits and Take-Home Pay
Italy taxes personal income (IRPEF) at three marginal rates in 2026: 23% on the first €28,000, 33% on income from €28,001 to €50,000, and 43% above €50,000. Employees benefit from a tax credit (detrazione per lavoro dipendente) of up to €1,955 and the Trattamento Economico Speciale (TES), a state-funded supplement that significantly reduces the tax burden for incomes up to €40,000. The practical no-tax threshold for employees is approximately €8,500; always verify your individual situation with a qualified tax professional.
The Three IRPEF Brackets for 2026
The 2026 Budget Law (L.199/2025, Art.1 c.3) cut the second bracket from 35% to 33%, delivering a meaningful reduction for middle-income earners. The three brackets effective from 1 January 2026 are: 23% on taxable income up to €28,000; 33% on the portion between €28,001 and €50,000; and 43% on any amount above €50,000. These are marginal rates — only the income that falls within a band is taxed at that band's rate, not the full income.
Employee Tax Credit (detrazione per lavoro dipendente, Art. 13 TUIR)
Employees receive a tax credit that directly reduces gross IRPEF. For annual income at or below €15,000 the credit is €1,955, with a guaranteed floor of €690 for open-ended contracts and €1,380 for fixed-term contracts. Between €15,001 and €28,000 it tapers from a base of €1,910, with an extra €65 for incomes between €25,001 and €35,000. Above €28,001 it phases out to zero at €50,000. At approximately €8,500 gross the credit exactly offsets gross IRPEF, making that the practical no-tax threshold for employees.
Trattamento Economico Speciale (TES) — the State-Funded Pay Supplement
L.207/2024 (commi 4-9), still in force for 2026, introduced the Trattamento Economico Speciale (TES) to replace the former social contribution discount (esonero contributivo). For incomes up to €20,000 the employer adds a non-taxable state-funded bonus to take-home pay: 7.1% of income up to €8,500; 5.3% for incomes from €8,501 to €15,000; and 4.8% for incomes from €15,001 to €20,000. This bonus is not subject to IRPEF, regional surtax, or municipal surtax. For incomes between €20,001 and €32,000 a separate additional tax credit of €1,000 is applied, phasing out proportionally to zero at €40,000.
Regional and Municipal Surtaxes (addizionale regionale e comunale)
On top of IRPEF, two local surtaxes apply on reddito complessivo. The regional surtax (addizionale regionale, D.Lgs. 68/2011 Art.6) starts at the national base rate of 1.23% and can reach a maximum of 3.33%; each region sets its own rates and bands. Lombardia applies progressive rates between 1.23% and 1.73%, Lazio reaches 3.33% for income above €28,000, and Sicilia applies a flat 1.23%. The municipal surtax (addizionale comunale, generally capped at 0.80% with historical exceptions) uses a cliff-edge exemption: if income exceeds the municipality's threshold, the tax applies to the full income amount.
Computing Annual Net Pay and the Year-End Reconciliation
Annual net income equals: RAL (gross annual salary) minus employee INPS contributions (provisional IVS rate 9.19%) minus net IRPEF (gross IRPEF minus detrazioni) minus regional surtax minus municipal surtax plus TES bonus (where applicable). The Trattamento Integrativo (ex Bonus Renzi, up to €1,125 per year, pro-rated) is added automatically for incomes up to €15,000 where gross IRPEF exceeds the detrazione. The employer performs a year-end reconciliation (conguaglio) no later than 28 February of the following year. Use the paycalceu.com salary calculator for a personalised estimate, and verify your individual situation with a commercialista or tax adviser.
FAQ
What are the Italian income tax brackets for 2026?
Italy's 2026 IRPEF brackets (L.199/2025 Art.1 c.3) are: 23% on income up to €28,000; 33% on income from €28,001 to €50,000; and 43% on income above €50,000. The second bracket was reduced from 35% to 33% compared with 2025.
What is the effective no-tax threshold for employees in 2026?
At approximately €8,500 gross annual income, the employee tax credit (€1,955) equals gross IRPEF, reducing net income tax to zero. The TES non-taxable bonus (7.1% of income) still applies at and below this level, boosting take-home pay.
Is the TES bonus subject to income tax?
No. The TES bonus for incomes up to €20,000 is a non-taxable state-funded supplement: it is not subject to IRPEF, regional or municipal surtaxes, or INPS contributions. It is separate from the Trattamento Integrativo (ex Bonus Renzi).
Do Italian employees need to file a tax return?
Most employees with a single employer are not required to file a return (modello 730 or Redditi PF), as the employer withholds and reconciles IRPEF as a sostituto d'imposta. A return is required when there are multiple income sources, deductions to claim (mortgage, medical expenses, etc.), or other specific circumstances. Verify your filing obligation with a CAF or a commercialista.
⚠️ Informational estimate, not tax advice. Payroll software may differ in edge cases. Verify with a professional.