No Taxes if You Earn Below This Threshold: New Developments for 2025

Proposed Tax Changes for 2025: No Tax Area Up to €12,000

The Italian government might see a significant shift in personal income tax (Irpef) regulations in 2025.
The proposal, primarily supported by Forza Italia, suggests that individuals earning up to €12,000 annually would not have to pay any taxes.
This initiative aims to be incorporated into the 2025 Budget Law and was recently highlighted by Deputy Prime Minister Antonio Tajani.

Tajani is advocating for this no-tax area expansion, along with a reduction in Irpef for the middle class.
However, uncertainties remain regarding the specifics of the year-end financial maneuver.
A reduction in the labor tax wedge and a three-rate structure for Irpef are likely to be retained, but details concerning other potential changes remain unclear.

Challenges and Political Consensus

As is customary, the primary challenge revolves around funding these initiatives.
The government aspires to introduce new measures for Irpef that will effectively reduce the tax burden on middle-income earners.
While there is a proposition to extend the flat tax for self-employed individuals to an income of €100,000, political consensus is forming around the idea of tax cuts for those earning above €50,000, who currently do not benefit from the existing three-tier Irpef rates.

Enhancing Economic Growth through Tax Reforms

According to Tajani, boosting the real economy is crucial for addressing public debt.
Key focuses include promoting job creation by businesses and enhancing worker income support.
This includes reaffirming the tax wedge cut and potentially expanding benefits like the maternity bonus.

Increasing employment leads to a broader tax base, benefiting state revenues.
The central idea behind the Irpef intervention is to align the expansion of the no-tax area with reductions for middle-income brackets.
Raising this threshold to €12,000 while reducing rates for the second income tier could alleviate inflation and stimulate business investment.

Proposed Structure for Irpef

The new proposed structure for Irpef suggests the following rates: for incomes up to €28,000, a 23% rate (considering a no-tax area of €12,000); for incomes between €28,000 and €60,000, a 33% rate (down from 35% for earnings up to €50,000); and for incomes above €60,000, a 43% rate.

Implications of a €12,000 No Tax Area

Currently, the no-tax area is set at €8,500 for employees and pensioners, and €5,500 for self-employed individuals.
This threshold denotes the earnings level where Irpef is offset entirely by applicable deductions.

For the no-tax area to be raised to €12,000, especially if only applicable to employees and pensioners, adjustments on deductions are necessary.
To achieve this, the deductions would need to be increased significantly, posing a potential financial strain on the state’s budget.

This initiative highlights the ongoing discourse about tax reform in Italy and its implications for economic recovery and social equity.