Flat Tax

Goodbye incremental flat tax, how much more will you pay in 2024?

Flat tax, introduced for those who choose the flat rate regime, remains a bulwark of the majority.
There are many obstacles, including the Constitution which provides for the principle of progressivity, but every now and then it comes back to appear among the proposals.
There has been a lot of talk about it, to the point that for 2023 the revenue and compensation limits for leaving the flat rate regime were increased so that the flat tax was extended.
Not only that, the incremental flat tax is envisaged in the 2023 budget law as an experimental measure.
There has been talk several times about extending the incremental flat tax to employees, but in fact this rule has never actually been introduced.
Many hoped that the relief measure would also be extended to 2024, but in fact the Budget law for 2024 provides nothing in this regard and we are now close to 31 December, the expiry date of the incremental flat tax and therefore there is an almost mathematical certainty that there will be no confirmation.
What changes for those who have a VAT number? How much extra tax will self-employed workers have to pay? Goodbye incremental flat tax, how much more will you pay in 2024? What does the incremental flat tax involve? How much do you save with the incremental flat tax? How much tax do you pay without an incremental flat tax? What does the incremental flat tax involve? The budget law for 2023, for the tax year 2023 only, for VAT holders, excluding flat-rate taxpayers who already pay taxes at a 15% rate, provides for the possibility of choosing the optional incremental flat tax regime.
The incremental flat tax applies to a tax base equal to the difference between the revenues and compensation produced in 2023 and "the highest business and self-employment income declared in the years from 2020 to 2022, reduced by an amount equal to to 5 percent of the latter amount.” The tax base for the incremental flat tax cannot exceed 40,000 euros.
read also The calculation of taxes becomes more complicated with the new Irpef, composition with creditors, flat tax and decontribution.
How much do you save with the incremental flat tax? The actual savings derived from this rule depends on the situation of the individual taxpayer.
For example, a VAT holder with a taxable income of 60,000 euros in 2023 should apply Irpef with a rate of: 23% up to 15,000 euros; 25% for incomes from 15,000.01 to 28,000 euros; 35% for incomes of 28,000.01 and 50,000 euros; 43% for incomes above 50,000 euros.
In the event that in 2022 (the year with the highest income among those to be considered) the same taxpayer declared 50,000 euros, here is how to calculate the potential tax base for the incremental flat tax.
The 2022 tax base must be reduced by 5% and is 2,500 euros.
So subtract 50,000 euros from 60,000 euros, leaving 10,000 euros from which 2,500 euros are subtracted: a tax base of 7,500 euros with a 15% rate remains.
So we have a double calculation, for the income share of 52,500 euros the ordinary rates apply.
On the taxable base of 7,500 euros the rate is 15% corresponding to an Irpef of 1,125 euros.
With the application of an ordinary rate to this tax base corresponds to the rate of 43%, consequently the taxpayer would have to pay 3,225 euros.
The savings are noticeable and amount to 2,100 euros.
However, let's see how much Irpef is due in total: first bracket rate at 23% up to 15,000 euros: up to 3,450 euros ([no tax area 5,500 euros for self-employed workers and businesses ->145763]); second bracket rate at 25% for 13,000 euros: 3,250 euros; third bracket rate at 35% on 22,000 euros: 7,700 euros; fourth bracket rate at 43% on 2,500 euros: 1,075 euros; we must therefore add the incremental flat tax of 1,125 euros.
The total tax due is: 16,600 euros.
How much tax do you pay without an incremental flat tax? The incremental flat rate has not been confirmed for 2024.
This implies that the taxpayer will be able to exercise the option in the 2024 return for income produced in 2023, but will no longer be able to do so in 2025 for income produced in 2024.
However, it should be remembered that in 2024 the new Irpef rates come into force: 23% on incomes up to 28,000 euros; 35% on incomes between 28,000 and 50,000 euros; 43% on incomes exceeding 50,000 euros.
read also 2024 Irpef rates and new brackets: what changes for calculation and deductions We start from the assumption that the taxable base is always 60,000 euros.
An important detail changes, namely that the new Irpef rates come into force in 2024.
The same taxpayer with a tax base of 60,000 euros will pay: first bracket 23% for incomes up to 28,000 euros: up to 6,440 euros (we must always also consider the no tax area); second bracket 35% on 22,000 euros: 7,770 euros; third bracket 43% on 10,000 euros: 4,300 euros.
Irpef due: 18,510 euros.
In fact, the same taxpayer, not being able to opt for the incremental flat tax, will pay more.
We must also add that the new Irpef provides an exemption for deductions which have a rate of 19% for taxpayers with an income exceeding 50,000 euros (in our case).
The deductible is 260 euros, consequently the same taxpayer will be able to take advantage of smaller deductions.
read also 2024 deductions, from the changes except for medical expenses

Author: A.W.M.

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