Pension and self-employment credits, and the gross-tax ceiling

Giuseppina, a retiree in Bari with 8,000 € of income, read that the pension credit can reach 1,955 euros and worked out a gross tax of 1,840 euros. She expected a refund of 115 euros. It will never come: credits bring tax down to zero, never below. Knowing this in advance avoids false hopes and a few poor choices within the family.

A different credit for each type of income

Next to the credit for employees, article 13 of the income tax act provides two more for people who live on other income: one for pension income, in paragraph 3, and one for self-employment and some related income, in paragraph 5. Each has its own bands and amounts, built on the same tapering pattern.

The employee credit is covered in the ActioFin course on IRPEF, with its bands and its scaling to the period worked. Here it serves only as a point of comparison: the two credits in this module are easiest to grasp by highlighting what sets them apart from the one attached to a salary.

The starting point is always the taxpayer's overall income, not the pension or the self-employment income alone. Someone with a pension and some income from land finds the band on the total. It is the same overall income, net of the main home, that is used for the family credits.

Credits by type of income do not add up

The pension credit cannot be combined with the employee credit, and the self-employment credit cannot be combined with either of them. A person with income of different kinds does not add up the article 13 credits: only one of them applies. Family credits, by contrast, always come on top.

The text lays down the ban on combining, but these lines do not say which credit to choose when more than one would be possible. Before filing, check it in the return instructions or with a professional. The ActioFin calculator computes each credit on its own and does not make that choice for you.

An example makes the problem visible. A retiree who also does occasional translation work holds both pension income and occasional self-employment income. Each of them belongs to the incomes that open an article 13 credit, but the law does not let her add the two: she will have to rely on one.

The pension credit

Anyone receiving a pension is entitled to a credit that paragraph 3 divides into three bands of overall income. The first runs up to 8,500 euros, the second from above 8,500 up to 28,000 euros, the third from above 28,000 up to 50,000 euros. Above 50,000 euros the pension credit is nil.

• Income up to 8,500 euros: 1,955 euros, with an effective minimum of 713 euros
• Above 8,500 and up to 28,000 euros: 700 euros plus 1,255 euros times the ratio of 28,000 euros minus income to 19,500 euros
• Above 28,000 and up to 50,000 euros: 700 euros times the ratio of 50,000 euros minus income to 22,000 euros
• Above 50,000 euros: no pension credit

The bands fit together. At 8,500 euros the second-band formula gives 700 + 1,255 × 19,500 / 19,500, that is 1,955 euros, the same as the first band. At 28,000 euros the ratio vanishes and the 700-euro base remains, from which the third band slides down to zero at 50,000 euros.

Paragraph 3-bis adds 50 euros for overall income over 25,000 and up to 29,000 euros. The range of this top-up differs from the one for salaries: anyone comparing a pension and a wage of the same size will not find the same figures, and should not expect to.

Days of pension and the 713-euro floor

Like the salary credit, the pension credit is scaled to the period of pension within the year. Someone who retires in the autumn is not entitled to the full yearly amount. The ActioFin calculator counts the days of pension over a 365-day year and multiplies the yearly credit by that fraction.

In the first band a floor then kicks in: the credit actually due cannot be lower than 713 euros. The calculator applies the floor after scaling to days, so that a retiree with a low income and only a few months of pension does not fall below that figure.

Do not confuse period scaling with the income band. The band is found on the overall income of the year, even if the pension lasted only a few months; it is the credit, once the band is known, that shrinks in proportion to the days. A short period does not move the taxpayer into a more generous band.

The credit for self-employment and small business income

Paragraph 5 covers a mixed group of incomes: self-employment income under article 53, small business income under article 66, some miscellaneous income under article 67 and some income treated like employment under article 50. It is the credit of the professional, and of the sole trader on simplified accounts, under the ordinary regime.

• Income up to 5,500 euros: 1,265 euros
• Above 5,500 and up to 28,000 euros: 500 euros plus 765 euros times the ratio of 28,000 euros minus income to 22,500 euros
• Above 28,000 and up to 50,000 euros: 500 euros times the ratio of 50,000 euros minus income to 22,000 euros
• Above 50,000 euros: no self-employment credit

The amounts are lower than those for pensions and salaries, and there is no guaranteed floor. On the other hand paragraph 5 does not contain the words scaling the credit to the period that appear in paragraphs 1 and 3: the calculator therefore grants the full yearly credit, even to someone who started trading in the autumn.

Paragraph 5-ter adds 50 euros when overall income is above 11,000 euros but not above 17,000 euros. That range sits lower than the pension one, and the step is sharp: moving from 17,000 to 17,001 euros of overall income costs the full 50 euros at once.

In the third band the credit tapers in the same way as the others: on 40,000 euros the ratio is (50,000 − 40,000) / 22,000 = 0.4545, truncated, and the credit is 500 × 0.4545 = 227.25 euros. At 50,000 euros it disappears, like every article 13 credit tied to a type of income.

The flat-rate scheme stays outside

A professional or craftsman under the flat-rate scheme does not pay IRPEF on business income: they pay a substitute tax. That income never goes through the brackets, and the self-employment credit does not reduce it. The calculator does not check the regime, so the user must rule it out first. The ActioFin flat-rate course covers its conditions.

Pension and self-employment side by side

The table makes one choice of the legislator visible: the more generous credit goes to the retiree on a modest income, protected by a floor and graduated over the period. The self-employed credit is smaller but does not shrink when the activity started mid-year. Two different logics, which should not be carried over from one to the other.

The gross-tax ceiling

All credits, whether tied to the type of income, to the family or to expenses, come off the same gross tax. The Agenzia delle Entrate puts it plainly: credits generally count only up to the tax owed, and any surplus is not paid back. When credits exceed the tax, Italians speak of incapienza.

The order in which credits are subtracted does not change the outcome: net tax never goes below zero. What it changes is how you read the calculators. Each ActioFin calculator compares its own credit with gross tax, one at a time; when you use several, the ceiling must be applied to their sum.

Insufficient tax hits low incomes hardest, which are precisely those the largest credits are aimed at. A retiree with 9,000 euros of income and a dependent wife can be entitled, on paper, to more credits than the tax he actually pays. The case study at the end of this module measures exactly how much.

Credit due and credit usable

ActioFin calculators show two figures. The credit due is what the law grants given income and circumstances; the usable credit is the part that fits within gross tax. When the two figures differ, the result flags it with a dedicated warning about the unused amount, so that nobody counts on money that will not arrive.

In a two-income household the distinction has practical effects. The children credit, for instance, can be assigned by agreement to the parent with the higher income: if the other parent has too little tax to absorb it, moving it avoids losing it. It is one of the few choices article 12 leaves to parents.

The rules of this module apply to the 2026 tax year, in version 37 of article 13 as published by the Gazzetta Ufficiale. From 1 January 2027 the income tax act is repealed by legislative decree no. 117 of 2026: credits for later years will have to be read again in the new text, which this course does not anticipate.