The government is advancing plans to increase the tax-free income threshold by €1,000 to €20,500 as part of a broader tax reform initiative presented today at the Presidential Palace.
The proposed reforms would establish a revised progressive tax system featuring five distinct brackets, significantly altering the current structure while raising the threshold at which the highest tax rate applies.
Proposed tax bracket adjustments:
- Income up to €20,500 → 0% (increased from current €19,500 threshold)
- €20,501 – €30,000 → 20%
- €30,001 – €40,000 → 25%
- €40,001 – €80,000 → 30%
- Above €80,001 → 35%
A notable aspect of the reform is the upward adjustment of the highest tax rate threshold, with the 35% rate now applying to incomes exceeding €80,000, rather than the current €60,000 threshold.
Relief measures target specific demographics
The reform package includes targeted tax deductions for households meeting established income criteria. Families with a combined gross income not exceeding €80,000 and two working spouses or partners would qualify for several deductions:
- €1,000 tax relief per spouse/partner for each child up to age 19 (female) or 21 (male)
- €1,000 per spouse/partner for students up to age 23 (female) or 24 (male)
- Deductions of up to €1,500 per spouse/partner for first-home mortgage payments or rental costs
Government representatives indicated the reforms aim to create a more equitable taxation system while reducing financial pressure on households across various income levels.
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