Tax Deductions, Bonuses, and Guarantees at Risk in 2025: Updates from the Budget Law

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Potential Risks to Bonuses and Benefits in Upcoming Budget Law

There are growing concerns that state bonuses, tax deductions, and guarantees could face significant cuts in the next Budget Law.
This maneuver aims at financial stabilization, which inherently leads to a stricter budget due to challenges in sourcing adequate funding.

The structural budget plan is set to be presented to the EU by September 20.
However, delays are anticipated, as the deadline is not rigid.
Some countries may even submit their plans as late as mid-October.
The Ministry of Economy and Finance may take additional time to incorporate economic data, which the Italian Statistics Agency (Istat) will release after September 23.
Such updates could indicate a revised growth in the 2023 GDP, thus potentially reducing the public debt burden.

Reducing Fiscal Benefits and Bonuses

For several years, the government has been considering measures to curtail fiscal benefits to save on public spending.
It appears that high-income earners are particularly at risk, as various proposals suggest cutting tax breaks to balance expenditures associated with year-end financial requirements.
Historically, from 2020 onward, tax deductions have shown a gradual decline relative to income, especially affecting those earning above €120,000.
Notably, deductions for those with incomes of €240,000 or more have completely vanished.

Additionally, in 2023, a new limit system for income tax was implemented, reducing the four existing brackets down to three.
As a result, the current benefit of the reduced income tax— €260 annually—was removed for those earning above €50,000 under a newly established threshold.

Future Cuts and Revisions on High-Income Deductions

The latest hypothesis from the Ministry of Economy and Finance (Mef) suggests a potential savings of around €2 billion by scaling back deductions for higher earners.
This appears logical, as the reduction in income tax brackets has diminished the progression of tax obligations, justifying the proposed cuts to maintain equity in fiscal imposition.

Tax deductions, which reduce owed tax from a gross amount, continue to affect those earning over €120,000 despite previous reductions.
This scenario highlights the necessity of revisiting such systems to ensure that lower-income individuals still benefit significantly, given that deductions can account for up to 33% of their income versus a mere 1.5% impact on high earners.

Assessing Risks to Deductions and State Guarantees

Technical experts are currently focusing on three critical areas: constraining tax deductions, reevaluating public guarantees, and revising the tax credit system.

In terms of deductions and fiscal advantages, it is feasible that income caps will be implemented, above which these benefits may become invalid.
While the current limit is €120,000, future plans could introduce a lower threshold impacting all deductions, including those currently exempt, such as medical expenses.

On the subject of state guarantees, following the COVID-19 pandemic, there is a move towards tightening these measures, specifically likely to see refinancing for the home guarantee fund and restrictions on other guarantees.

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