What the regime is worth: 50 %, 40 % with a minor child and the €600,000 cap

Elena, a corporate lawyer, moves from Frankfurt to Rome in 2026 with her eight-year-old son and registers for VAT under the ordinary regime. She expects €80,000 of fees net of expenses in her first year. Without relief her gross IRPEF would be close to €27,000; with the impatriate regime and a minor child it falls below €8,000. That gap is not a fluke: it is how the relief is built.

The mechanism: only part of the income is taxed

The regime is neither a reduced rate nor a tax credit. It works upstream: eligible income enters the overall taxable income only for part of its amount. The excluded part never reaches the IRPEF calculation, and so it never climbs through the brackets either.

Paragraph 1 of article 5 sets the share at 50 %. On a €90,000 eligible salary, then, €45,000 goes into overall income.

Because IRPEF is progressive, halving the base does more than halve the tax: it drops the taxpayer into a lower bracket, and the saving grows faster than income as income rises.

40 % for parents of minor children

Paragraph 4 lowers the taxable share to 40 % in two cases. The first is a worker who moves to Italy with a minor child. It is the most common case for people who come back with their family, and, as explained just below, it only works if the child actually lives in Italy.

The second is the birth of a child, or the adoption of a minor, while the regime is running. The lower share then starts from the tax year in progress at the birth or adoption and lasts for whatever remains of the five years.

Paragraph 5 adds a condition that is easy to forget: the extra relief applies only if the minor child, or adopted minor, is resident in Italy during the regime. A parent who returns while the child stays at school abroad with the other parent remains at 50 %, even though the child is a minor.

The €600,000 annual cap

Paragraph 1 says eligible income enters overall income at 50 % within an annual limit of €600,000, and the Agency's page uses the same words. The text does not spell out how the part above the cap is treated, and this course has not read any guidance that settles it.

The plainest reading, which ActioFin's tools also use, is this: the relief applies up to €600,000 of eligible income, while any excess enters overall income in full.

With €700,000 of eligible income, €300,000 would go in for the relieved part plus €100,000 of excess, so €400,000. Anyone genuinely in that range should have the calculation confirmed by a professional.

At that level there is a second effect to know about. The Agency's page on IRPEF rates notes that the 2026 budget law introduced, for taxpayers whose overall income exceeds €200,000, a mechanism that cancels the benefit of the cut in the second rate.

Every example in this module stays below that threshold, precisely so that the mechanism never needs estimating. Above €200,000 of overall income, the only safe figure is the one produced by a complete calculation.

The 2026 brackets and gross tax

To measure the relief you apply the IRPEF brackets to overall income after the reduction. For 2026 there are three brackets, and the budget law cut the second rate. The figures below come from ActioFin's IRPEF calculator, which takes them from the text in force.

The calculation goes slice by slice. The first €28,000 is taxed at 23 %, which gives €6,440. The slice between €28,000 and €50,000 is taxed at 33 %: filled completely it adds €7,260, for €13,700 in total.

Above €50,000, every euro is taxed at 43 %. The Agency's own page gives the same €13,700 figure for taxable income of €50,000.

Comparing 50 % and 40 %

Ten points of taxable share sound modest, yet on middle and higher incomes they count. Progressivity again explains why: each euro removed from the base comes off the highest bracket reached, so at 33 % or 43 %. The table applies both shares to the same eligible incomes as before.

At €60,000 the lower share pulls the taxable amount under the first-bracket ceiling, so all of it is taxed at 23 %. At €90,000 the 40 % base stays well inside the second bracket, and the gap with the 50 % base is €2,970 of gross tax.

At €120,000 the 40 % base stays in the second bracket while the 50 % base goes beyond it. The extra benefit of having a minor child ranges from about €1,600 to almost €5,000 of gross tax a year.

Those amounts explain why the child's residence deserves careful paperwork. Residence certificates, school enrolment, a family lease: these are what show, if the tax office asks, that the child really lives in Italy throughout the period in which the lower share is used.

The five-year view and the cost of leaving early

The regime should be judged over its whole five years, not a single one. With stable eligible income the saving repeats every year; with rising income it rises too, since the excluded part grows with the income. But the saving depends on staying, and that belongs in the plan from day one.

The lesson is not to turn the regime down but to treat the early-year saving as a security deposit. If there is a fair chance you will leave soon, keep at least that amount aside, or ask your employer what happens when the company itself transfers you abroad.

For people who moved in 2024 and bought their home within the paragraph 10 window, the horizon stretches by three years, still at the 50 % share. The 40 % share for minor children is not mentioned in that paragraph, which speaks of 50 % only.

With stable eligible income of €60,000, each of those three extra years saves €10,900 of gross tax compared with ordinary taxation: €18,000 minus €7,100. Over the three extra years the total comes to €32,700, again before credits and surcharges.

Other income is taxed in full

The reduction applies only to the income listed in paragraph 1 and produced in Italy. Everything else the taxpayer has, such as rent, follows the ordinary rules and enters overall income in full, on top of the relieved share.

Stacking has an effect that surprises back-of-the-envelope estimates. Other income sits above the relieved share and fills the higher brackets: rent that alone would be taxed at 23 % can end up at 33 % because the relieved share has already filled the first bracket.

What the regime does not change

All the amounts above are gross tax. The Agency's page on rates recalls that the IRPEF actually due is gross tax minus credits for the type of income, for dependants and for certain expenses, and minus any tax credits.

Since overall income goes down, some income-linked credits may even rise: an effect to check case by case with a full calculation.

The text speaks of overall income, the base of income taxes; social security contributions follow their own rules, which this course does not cover. Regional and municipal surcharges have their own rules as well, and deserve the same recalculation on your own figures.

The rule to remember is simple: the reduction works on the IRPEF base, not on gross pay and not on the employer's labour cost.

Finally, the relief is annual and conditional. The conditions must hold in every one of the five years, starting with working in Italy for most of the year. A year spent mainly abroad can cost the relief for that very year, even if residence stays in Italy.