From income to net tax: IRPEF brackets and the employment tax credit

When Sara, an office worker in Turin, went from 28,000 € to 32,000 € of income, she feared her whole salary would now be taxed at 33 %. That is not what happened: only the extra 4,000 euros fall into the second rate, and her gross IRPEF rises by 1,320 euros, not by several thousand. Understanding the brackets means no longer being afraid of a pay rise.

Who pays IRPEF and on what income

IRPEF, the Italian personal income tax, is owed by anyone holding income from land and buildings, from capital, from employment and similar sources including pensions, from self-employment, from a business, and the so-called miscellaneous income. It is the tax that covers the employee, the pensioner and the professional under the ordinary regime alike.

For an Italian resident, overall income includes all income wherever it arises. For a non-resident it includes only income arising in Italy. The difference matters to anyone working across a border, and double taxation treaties also come into play there.

This module follows the employee and the self-employed person under the ordinary regime. Someone using the flat-rate scheme does not compute IRPEF on the income of their business: they pay a substitute tax under rules of its own, covered in a separate course.

From overall income to taxable income

The starting point is overall income, the sum of the year's income. From it you subtract deductible charges, certain expenses the law allows you to take off before computing the tax. The Agenzia gives social security and welfare contributions and donations to non-profit bodies as examples.

• Overall income less deductible charges gives taxable income
• Taxable income run through the bracket rates gives gross tax
• Gross tax less tax credits, up to its own amount, gives net tax
• Net tax less any tax offsets the taxpayer is entitled to
• What remains, less withholding already suffered and advances already paid, gives the balance to pay or the refund due

Keeping these steps apart avoids the most common muddle: lumping deductions and credits together as if they were the same. A deduction shrinks the base on which the tax is computed; a credit shrinks the tax once computed. A thousand euros deducted and a thousand euros credited are not worth the same.

With income taxed at 23 %, deducting a thousand euros saves 230 euros, because it removes a thousand euros from the base. A thousand-euro credit saves the full thousand, because it comes straight off the tax. A deduction is worth more at a higher marginal rate; a credit is worth the same to everyone, within the limit of the tax.

The 2026 brackets

Article 11 of the consolidated act, in the consolidated text read in the Gazzetta Ufficiale, sets three brackets. Up to 28,000 euros the rate is 23 %; above 28,000 and up to 50,000 euros it is 33 %; above 50,000 euros it is 43 %. These are the gross tax rates for the 2026 tax year.

Brackets work in slices. Each rate hits only the part of income that falls within its bracket. Someone earning 50,001 euros does not pay 43 % on everything: they pay it on one euro. The rest of their income is still taxed at 23 % and 33 %, exactly as it would be for anybody else.

Two different measures follow. The marginal rate is the one charged on the last euro earned, and tells you what a pay rise costs in tax. The average rate is gross tax divided by taxable income, and tells you how heavy the tax is on the whole. The calculator returns both.

The values in the table follow from the brackets: 23 % of 28,000 euros is 6,440 euros, and 33 % of the 22,000 euros in the second slice is 7,260. The Agenzia delle Entrate gives the same 13,700 euro figure in its notice on the 2026 Budget Law.

That Agenzia page deserves a careful read. Its table still shows 35 % for the second bracket, while the warning box underneath explains that the 2026 Budget Law cut it to 33 %. The consolidated text in the Gazzetta Ufficiale reads 33 %: that is the source that prevails.

The same notice says that for taxpayers with overall income above 200,000 euros the law provides a mechanism that neutralises the benefit of the cut. The bracket calculator does not apply it; anyone in that range needs to account for it separately.

The employment tax credit

Anyone receiving employment income is entitled to a credit against gross tax, set by article 13, paragraph 1, of the consolidated act. It is not a fixed sum: it depends on overall income and shrinks as income rises, until it disappears altogether.

• Overall income up to 15,000 euros: 1,955 euros
• Above 15,000 and up to 28,000 euros: 1,910 euros plus 1,190 euros times the ratio of 28,000 euros less income to 13,000 euros
• Above 28,000 and up to 50,000 euros: 1,910 euros times the ratio of 50,000 euros less income to 22,000 euros
• Above 50,000 euros: no credit

The ratio in the two middle bands is what makes the credit taper. The closer income gets to the top of the band, the smaller the numerator becomes. At 28,000 euros the second band's ratio is zero and only the base remains; at 50,000 euros the third band vanishes too.

Paragraph 6 of the same article provides that the result of these ratios, when above zero, is taken to its first four decimal places. The calculator reads this as truncation: the first four digits after the decimal point are kept, and the fifth is not used to round.

In the first band the text sets floors. The credit actually due cannot fall below 690 euros, or below 1,380 euros for fixed-term employment. The floors matter above all to people who worked only part of the year, as the next section shows.

Paragraph 1.1 adds a top-up of 65 euros when overall income is above 25,000 euros but not above 35,000 euros. It is small, but it creates a step: going over 35,000 euros by a single euro costs the whole 65 euros at once.

The overall income used for the credit is taken net of the income from the main home and its appurtenances, as paragraph 6-bis specifies. That detail matters to anyone who owns the home they live in and also reports its income from property.

Scaling the credit to the period worked

The credit is due in proportion to the period worked in the year. Someone hired in September is not entitled to the full annual credit. The calculator counts that period in days out of a 365-day year and multiplies the annual credit by the days worked divided by 365.

This is where the floors come in. A fixed-term worker with 12,000 euros of income and 146 days worked would have a scaled credit of 1,955 × 146 / 365, that is 782 euros. The 1,380 euro floor for fixed-term contracts lifts it back to that figure.

From gross tax to net tax

Net tax is gross tax less credits, but only up to the amount of the gross tax. The Agenzia puts it plainly: credits are generally allowed up to the tax due, and amounts above it are not refunded. Whatever exceeds the tax is simply lost.

The employment credit is not the only one. There are credits for a spouse, for certain children and for dependent relatives living with the taxpayer, and credits linked to spending during the year, such as health, education and mortgage interest on the home. Computing them lies outside this module.

A self-employed person under the ordinary regime does not get the paragraph 1 credit. Paragraph 5 of the same article grants certain income, self-employment included, a credit of its own with different bands, which cannot be combined with the employment credit. Someone with both kinds of income does not add the two together.

After credits come any tax offsets the taxpayer is entitled to. By its own declared choice, the ActioFin calculator leaves out the measures of Law no. 207/2024, the supplementary payment for employees and the credits for family members and expenses. Those are written assumptions, not oversights.

When no tax is due at all

Article 11 also provides two cases in which no IRPEF is due, whatever the computation gives. The first covers someone whose only income is a pension of no more than 7,500 euros received for the whole year, land income up to 185.92 euros and the income of the main home with its appurtenances.

The second covers someone whose only income comes from land and buildings, totalling no more than 500 euros. In both cases the decisive word is only: a single item of income of another kind, however small, is enough to switch the exemption off and send you back to the ordinary bracket computation.

These cases rarely touch an employee or a professional, but they explain why a relative with a small pension or an inherited field may owe nothing. Anyone helping a family member with their return should check them before starting the calculation.

The surcharges and the texts that are changing

IRPEF comes with regional and municipal surcharges, which the Agenzia names alongside income taxes. This course does not quantify them: they depend on the region and the municipality, and we have not read their rates on a served official source. The bracket calculator computes gross IRPEF only.

The consolidated income tax act, where the brackets and credits come from, was repealed by Legislative Decree no. 117 of 19 June 2026, with effect from 1 January 2027. For the 2026 tax year articles 11 and 13 still apply in the version read. This course does not anticipate what the new text will contain.