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From income to net tax: IRPEF brackets and the employment tax credit
The module’s worked examples, then cases to attempt before revealing their solution · 3 sections · 291 words · 3 min
Worked example
Sara's gross tax
Sara has taxable income of 32,000 euros. The first 28,000 euros are taxed at 23 %: 6,440 euros. The remaining 4,000 euros fall into the second bracket and are taxed at 33 %: 1,320 euros. Her gross tax is 7,760 euros. Her average rate is 24.25 %, her marginal rate 33 %.
Worked example
Sara's employment credit
With 32,000 euros of overall income and a full year of work, Sara is in the third band. The ratio is (50,000 − 32,000) / 22,000 = 0.818181…, truncated to 0.8181. The credit is 1,910 × 0.8181 = 1,562.57 euros. Her income lies between 25,000 and 35,000 euros, so 65 euros are added: 1,627.57 euros. From gross tax of 7,760 euros, net tax of 6,132.43 euros remains.
Practical case
Matteo, a warehouse worker on a permanent contract
Matteo works on a permanent contract for the whole of 2026 and has overall income of 20,000 euros, with no deductible charges, no other income and no other credits. Work out his gross tax, his employment tax credit and his net tax for 2026.
Hint: Only one bracket is involved. For the credit, find the band, then compute the ratio and truncate it at the fourth decimal place before multiplying.
Show the solution
Gross tax: all 20,000 euros sit in the first bracket, so 20,000 × 23 % = 4,600 euros. Credit: income is above 15,000 and up to 28,000 euros, the second band. Ratio: (28,000 − 20,000) / 13,000 = 0.615384…, truncated to 0.6153. Credit: 1,910 + 1,190 × 0.6153 = 1,910 + 732.21 = 2,642.21 euros. There is no top-up, since income does not exceed 25,000 euros. The year is complete, so no scaling to the period. Net tax: 4,600 − 2,642.21 = 1,957.79 euros.
Answer: Net tax of 1,957.79 euros
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