Tax cuts on the horizon from 2025: three income bracket rule

Three income brackets with a general cap on reimbursable expenses. The government aims to revolutionize the regulation of tax deductions by introducing a mechanism based on the “family coefficient”, which it expects to achieve around a billion euros. The change of course was announced by Economy Minister Giancarlo Giorgetti and his deputy Maurizio Leo at the press conference on the maneuver last Wednesday. The aim is to parameterize the deduction amount according to the number of members of a family.

What will tax cuts change in 2025?

The only limit on deductible expenses today is represented by what is called the taxpayer’s “tax capacity.” Simply put, the refund cannot be more than the Irpef paid annually. Things may change starting in 2025. How? Il Sole 24 Ore predicted some details of the plan the government is working on. Since this is only a reform draft, it is subject to change by parliament and some caution should be exercised in this regard.

In any case, according to this hypothesis, the idea would be to introduce three specific thresholds of 4%, 6% and 8% for the same number of income groups.

  • up to 50,000 euros: 8% threshold;
  • Between 50,000 and 100,000 euros: 6% threshold;
  • Above 100,000 euros: 4% threshold.

family section

Therefore, the limit of deductible expenses in the first income bracket will be 4 thousand euros (8% of 50 thousand euros). But be careful: this is where the family coefficient will come into play: deductions will be larger for those with dependent children and smaller for singles and smaller families. In particular, the maximum tax deduction threshold will increase to 8 thousand euros for families with at least three children who fall within the income range of 0 to 50 thousand euros.

The measure will not be retroactive

All deductible expenses, from medical expenses to mortgage interest to various bonuses for the house, will be included in the calculation. We should also note that the rule will not be retroactive and will only be valid for expenses incurred starting from 2025.

A more complex system

So far the information has been leaked to the press. However, the new mechanism still needs to be partially deciphered. But as well as making the refund calculation much more complex, it seems clear that the new rules will penalize singles and couples, and will particularly impact taxpayers who have cut out quite significant expenses (perhaps after building works). To be clear, anyone who deducts a few hundred euros for healthcare or other expenses will have nothing to fear.

Source: Today IT

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