Tax deductions for employees in 2024: changes in calculation and savings

Changes in Tax Deductions for Salaried Employees in 2024

For employees with taxable income, there is a tax deduction that allows for a reduction in personal income tax based on gross salaries.
These deductions are recognized by Article 13 of the Tuir, but they have been modified by Legislative Decree 216/2023.
In 2024, with the merging of the first and second Irpef rates, the calculation of deductions for salaried work also changes.
The adjustment of tax brackets also leads to new tax deductions for employees.
As of January 1, 2024, the calculation of deductions has changed.

Changes have also been made to deductions for expenses incurred by those with incomes over 50,000 euros, as a threshold has been introduced that cancels out the benefits of the new Irpef.
Moreover, for individuals with incomes exceeding 120,000 euros, the intersection of old and new rules results in a double cut in the deductions allowed.

All these modifications are clarified in Circular No.
2 of February 6, 2024, issued by the Revenue Agency.

Key Updates on Salaried Work Deductions in 2024

One of the primary novelties, as mentioned earlier, is the modification of the calculation of salaried work deductions in 2024.

Unlike 2023, the Renzi Bonus has remained unchanged.
This means that the supplementary treatment of 100 euros in the payslip has been confirmed for 2024 as well.
The pool of beneficiaries remains unchanged since the income limits required to access the supplementary treatment will not undergo any modifications thanks to a change in the calculation operation that also involves this benefit.

Let’s delve into the latest deductions for employees, the changes to Irpef, and how the payslip is affected.

Calculating Salaried Work Deductions with the 2024 Updates

Starting with the fiscal reform’s impact on Irpef, the transition from 4 to 3 tax brackets has been made:

• 1st tax bracket: up to 28,000 euros at 23%
• 2nd tax bracket: from 28,000 to 50,000 euros at 35%
• 3rd tax bracket: over 50,000 euros at 43%

In 2024, the Irpef not only shifts to 3 tax brackets and thresholds but also changes the calculation method of deductions for both employees and self-employed individuals as well as pensioners.
The deductions for salaried work in 2024 for incomes up to 15,000 euros increase from the current 1,880 euros to 1,955 euros.

The No Tax Area is set at 8,500 euros, the same for both employees and pensioners.
Regarding salaried workers, the deduction scheme is as follows:

• Up to 15,000 euros: 1,955 euros due to the expansion of the No Tax Area
• Over 15,000 up to 28,000 euros: 1,910 + 1,190 * (28,000 – income) / (28,000 – 15,000)
• From 28,000 to 50,000 euros: 1,910 * (50,000 – income) / (50,000 – 28,000)
• Over 50,000 euros: 0

A significant advantage will be seen in the pockets of taxpayers with incomes ranging from 18,000 to 50,000 euros; the maximum actual increase in take-home pay will be 260 euros per year (solely due to Irpef savings).

After crossing the 50,000 euros threshold, the effects are nullified by the new deduction threshold.

It should be noted that as per Article 13, paragraph 1, letter a) of the Tuir, the amount of the deduction granted cannot be less than 690 euros.
For fixed-term employment relationships, the amount of the deduction cannot be less than 1,380 euros.

Compared to the previous structure, the new Irpef:

• Expands the first income threshold eligible for the 1,955 euro deduction from 15,000 to 28,000 euros.
• Reduces Irpef by 2 percentage points for incomes between 15,000 and 28,000 euros.
• Applies a threshold to deductions for incomes over 50,000 euros, set at 260 euros.
  This threshold applies to deductions with a rate of 19%, excluding medical expenses which have an independent threshold regardless of income.

Determining Eligible Work Deductions

The amount of deductions is based not only on work incomes but also on the period covered by the employment relationship.
In general, work deductions are calculated by the withholding agent directly on the payslip, resulting in a reduction in Irpef that translates into an actual increase in net salary.

For those who do not receive deductions on the payslip, there is the possibility to claim them in the income tax return as a settlement, providing a discount on the tax owed (which for employees translates into a refund).

Work deductions are calculated based on the actual days of work and therefore apply even for weekly rests, holidays, sickness, and vacations.
They should not be considered for days when no remuneration is due (e.g., periods of unpaid leave).

Cut in Deductions for Incomes over 50,000 Euros

The provisions for individuals with incomes exceeding 50,000 euros nullify the benefits brought by the introduction of the new Irpef rates since a threshold of 260 euros is set on the eligible deductions, equal to the increase due to Irpef savings resulting from the change from four to three tax brackets.

The application of the 260-euro threshold applies to the following deductions:

• At 19% for incurred expenses, excluding medical expenses.
• At 26% for donations to political parties between 30 and 30,000 euros.
• At 90% for insurance premiums for catastrophic events.

From the deduction obtained for these expenses, the 260-euro threshold is subtracted.

For incomes above 120,000 euros, the cut is doubled, as clarified by the Revenue Agency in the circular, as the 260-euro threshold must be applied to an already reduced deduction amount according to the conditions mentioned.

Bonus Renzi 2024: Changes and Updates

Until 2023, the Renzi Bonus, a supplementary payment of 100 euros, was granted to salaried workers with incomes up to 15,000 euros and, only if the deduction due exceeded the tax owed, also to those with incomes between 15,000 and 28,000 euros.

In 2024, while maintaining the principle that the Renzi Bonus can only be granted when the tax owed is higher than the deductions due, an amount of 75 euros (proportionate to the worked period in the year) must be subtracted from these deductions.
Through this stratagem, the Renzi Bonus can be safeguarded for those earning between 8,174 and 8,500 euros, who, although falling within the No Tax Area, will still be entitled to the integration.

The deductions to consider for the calculation are:

• Family burden deductions (Article 12, paragraph 1 TUIR).
• Work-related deductions (Article 13, paragraph 1 TUIR).
• Agricultural loans and mortgages (Article 15, paragraph 1 – letter a TUIR).
• Mortgages for the purchase of the first house (Article 15, paragraph 1 – letter b TUIR).
• Medical expenses (Article 15, paragraph 1 – letter c TUIR).
• Building renovations and energy efficiency deductions (Article 16-bis TUIR).