Irpef: what it is, who pays it, how it works and what the rates are

What is Irpef and how does it work? Who is required to pay and at what rates? Let's start by saying that Irpef is a tax and not a tax.
Taxes, in fact, are owed by citizens in exchange for goods or services (such as the Tari, which is the tax paid in exchange for the disposal and collection of waste), while taxes are paid to contribute to collective services indivisible, i.e.
they do not have a specific destination, but are used to finance everything that cannot be connected to those who benefit directly from it (for example security).
In this complete guide we answer all the doubts that may arise on the thorny topic concerning the income of natural persons and how Irpef is calculated.
Irpef: what is it, who pays it, how does it work and what are the Irpef rates, what is it? How Irpef works Who pays IRPEF Who doesn't pay IRPEF IRPEF 2024 rates IRPEF 2024 deductions How the deduction of expenses changes for those with an income exceeding 50,000 euros How deductions and deductions lower Irpef 2024 Calculation of Irpef 2024 Taxable and total income for Irpef purposes, the difference in gross Irpef and net Irpef, the difference in Irpef Payment and Deadlines, what is it? IRPEF is the acronym for Personal Income Tax.
It is a progressive, personal and direct tax, which weighs on the incomes of natural persons in Italy.
Managed by the Revenue Agency, the IRPEF contributes to the financing of public services such as health, education and infrastructure.
The Personal Income Tax (IRPEF) represents a fundamental component of the Italian tax system and VAT taxation.
It weighs on the incomes of natural persons resident in Italy and on the income produced in the national territory by non-residents.
Irpef is the tax par excellence, the one paid by anyone (or almost anyone) who produces an income.
This is a personal, direct and progressive tax, but what does it mean? Simply put, Irpef is: personal, as each person is taxed on the income produced; direct, because it directly affects wealth when it is produced (income); progressive, as its amount grows more than proportionally to the increase in income.
The Irpef is regulated by the Tuir which regulates, in addition to taxation, also any deductions and deductions that are due to people subject to the tax.
The tax has been in force since 1973 and affects approximately 40 million taxpayers.
Until 2022, five income brackets were foreseen which corresponded to the same number of Irpef rates.
The 2023 Budget Law reduced the rates and brackets to four starting from 1 January 2023.
With the 2024 Budget Law, new changes are made to the income tax brackets and rates, reducing the latter to three.
How Irpef works IRPEF is characterized by the principle of progressivity, which establishes that the tax rate increases proportionally to the increase in declared income.
This means that people with higher incomes pay a higher percentage of their income than those who earn less.
This approach aims to guarantee greater fiscal fairness, considering people's ability to pay.
The main elements of IRPEF include the determination of taxable income, which is the basis on which the tax is calculated.
Taxable income includes various sources of income, such as employment income, self-employment income, pension income, interest, dividends and other forms of earnings.
However, there are some income categories that may benefit from specific tax exemptions or regimes.
The IRPEF is calculated by applying the rates established by law, which determines the income brackets to which the different percentages are applied.
These rates may vary from year to year and are subject to periodic revisions.
It is important to keep in mind that your personal income tax may be subject to deductions, deductions and tax credits that may reduce the final amount you pay.
IRPEF rates vary based on declared income, so people with higher incomes pay a higher percentage.
The objective of the IRPEF is to guarantee a fair distribution of the tax burden, considering the ability to pay and promoting social solidarity.
Who pays IRPEF IRPEF is a tax that involves various subjects within the Italian tax system.
Let's see who the main taxpayers are required to pay IRPEF and what types of income are involved: Italian citizens: all Italian citizens are subject to paying IRPEF based on their income.
Regardless of residence, if an Italian citizen has income from Italian or foreign sources, he or she is required to declare it and pay IRPEF in Italy.
Residents of Italy: Individuals who reside in Italy for most of the year are subject to the payment of IRPEF on worldwide income, including income from work, pensions, interest, dividends and other sources of income.
Non-resident foreigners with income produced in Italy: foreigners who do not reside in Italy, but who obtain income produced within Italian territory, such as income from the rental of properties located in Italy or income deriving from temporary work activities in the country, are required to pay IRPEF on income produced in Italy.
Individuals with income subject to separate taxation: some income, such as capital income, may be subject to separate taxation, i.e.
a substitute tax for IRPEF.
In these cases, the subjects who obtain such income are required to pay the specific tax, even if they are not subject to IRPEF for the rest of the income.
It is important to underline that there are international rules and conventions to avoid double taxation, which allow you to avoid the same income being taxed both in Italy and in the country of residence or origin.
In other words, those who pay IRPEF are all those who have tax residence in Italy and who produce the following types of income: income from employment; income from self-employment; retirement income; capital income: income linked to the ownership of shares, bonds, government bonds and other forms of investments; land income: income deriving from the possession of land, such as rent or agricultural income; various incomes, coming from financial investments, winnings, occasional services or other sources of income not included in the other categories; business income, generated by entrepreneurial activity.
Those who do not pay IRPEF There is a category of taxpayers exempt from paying IRPEF: these are those who fall within the income bracket of the no tax area, exempt from taxation.
The exemption varies based on the deductions applied for employment, pension or self-employment, decreasing as income increases.
In general, you do not pay IRPEF if you receive: pension income of less than 8,500 euros per year; income from buildings up to 500 euros per year, income from land up to 185.92 euros per year, income from employment up to 8,500 euros per year, income from self-employment up to 5,500 euros per year.
IRPEF rates 2024 The IRPEF rates underwent a remodulation in 2024 which reduced them from four to three, after the changes introduced in 2022.
The 2022 Budget law had already reduced the rates from five to four by making changes in the calculation methods.
Therefore, the 2024 Irpef rates have been reduced, compared to the previous year, from four to three.
Remembering that the IRPEF is a direct tax that aims to tax income deriving from employment, self-employment and similar income, for the tax year 2024, the three rates and related income brackets are as follows: 1st Bracket: Up to 28,000 euros – IRPEF rate: 23% 2nd bracket: Between 28,001 euros and 50,000 euros – IRPEF rate: 35% 3rd bracket: Over 50,001 euros – IRPEF rate: 43% For example, for an income of 15,000 euros, the The tax to be paid will be equal to 3,450 euros, calculated by applying the rate of 23% to income.
For an income of 31,000 euros the tax to be paid will be 6,440 euros up to 28,000 euros, and 1,050 euros for the portion of income up to 31,000 euros.
The total IRPEF due is equal to 7,490 euros.
These rates represent the tax structure of the IRPEF and taxpayers must take them into account to correctly calculate the tax due based on their income.
To ensure correct completion of your tax return, it is advisable to consult a tax expert.
In this way it will be possible to identify and specify the deductions and deductions to which you are entitled, allowing a more accurate calculation of the tax to be paid.
The assistance of a tax professional can help streamline your tax return, ensuring compliance with tax regulations and maximizing the tax benefits available to you.
IRPEF deductions 2024 IRPEF deductions for the 2024 tax year are applied based on the type of income received and follow the new calculation mechanism introduced by the 2024 Budget Law.
In the case of employees, the deductions are regulated by article 13 of TUIR (Consolidated Income Tax Act) and depend on the income bracket.
For example, for incomes up to €15,000, deductions vary from a minimum of €690 to a maximum of €1,955.
For incomes between €15,000 and €28,000, the formula is: 1,910+1,190*(28,000-income)/ (28,000-15,000) For incomes between €28,000 and €50,000, another formula applies: 1,910*[50,000-income)/(50,000-28,000).
In the income range from 25,000 to 35,000 euros, the deduction is increased by 65 euros.
For employees, there is also an IRPEF bonus, known as the Renzi bonus.
This is a supplementary payment that is inserted directly into the pay slip up to a maximum limit of 100 euros per month for incomes up to 28,000 euros.
In particular, for employees with incomes above 8,174 euros and up to 15,000 euros, it is entitled to the maximum amount.
For those in the range between 15,000 and 28,000 euros, the bonus is available on condition that the sum of the deductions for expenses incurred up to 31 December 2023 is greater than the gross tax.
For assimilated incomes and other types of income, received by VAT numbers and self-employed workers, the deductions follow the provisions of article 13 paragraph 5 letters a) and b) of the TUIR.
For example, for incomes up to 5,500 euros, the amount of the deduction is 1,265 euros.
For incomes from 5,500 euros to 28,000 euros, the deduction is calculated with this formula: 500+(1,265-500)*(28,000-income)/(28,000-5,500) For incomes from 28,000 euros to 50,000 euros, another formula: 500*[50,000-income)/(50,000-28,000).
In the income range between 11,000 and 17,000 euros, the deduction is increased by 50 euros.
For pension income, the deductions follow the new calculation scheme provided for by article 13 paragraph 3 letters a) and b) of the TUIR.
for incomes up to 8,500 euros, the amount of the deduction is 1,955 euros, not less than 713 euros; for incomes from 8,500 euros to 28,000 euros, this formula applies: 700+(1,955-700)*(28,000-income)/(28,000-8,500) for incomes from 28,000 euros to 50,000 euros, another formula is used: 700 *[50,000-income)/(50,000-28,000).
the income bracket between 25,000 euros and 29,000 euros is entitled to an increase in the deduction of 50 euros.
How does the expense deduction change for those with an income exceeding 50,000 euros To maintain what has been defined as horizontal equity, as we have said, for holders of a total income exceeding 50,000 euros, the gross deduction due decreased by an amount equal to 260 euros for the deductions due for: all expenses which benefit from a 19% deduction with the exclusion of healthcare costs (these expenses include (for example, interest paid on mortgages for the first home, funeral expenses, rent for away students, school and university education expenses, just to name a few); insurance premiums for disaster risk.
However, all other deductions due, such as those for building renovation, are not subject to reduction.
How deductions and deductions lower the 2024 Irpef Once the Irpef rates have been applied to the income produced, the gross Irpef due is obtained.
The taxpayer, however, must pay the net tax, i.e.
the one reduced by the deductions.
The deductions allow, in fact, to reduce the tax due (once this has been calculated on the overall income) and are recognized in part based on the taxpayer's condition.
For employees and pensioners in 2024 the maximum deductions recognized on the income produced are 1,955 euros; as happens for the tax, which increases as income increases, the same mechanism is recognized for deductions on income from work which decrease as income increases, to leave the action of the progressive tax.
In addition to the deductions recognized for the taxpayer's condition, there are a series of 19% deductions on expenses incurred for various reasons (health, education, mortgage interest, etc.) and other deductions of a higher percentage for expenses incurred for the maintenance, efficiency and renovation of properties.
read also Deductions 730/2024: the complete list of expenses that can be downloaded.
Deductions, however, act not on the gross Irpef by reducing it, but by lowering the taxable income on which the Irpef is calculated.
In fact, therefore, those who are entitled to deductions subtract them from their overall income before the application of Irpef rates.
In this case, therefore, the tax discount is given by the rate that would have been paid on the deducted amount.
The deductions, among other things, also help to avoid switching to the higher Irpef rate due to exceeding the income bracket, given that the deductions are calculated before the application of the Irpef rates on income.
Calculation of Irpef 2024 The calculation of Irpef 2024 depends on several factors, including the rates, deductions and deductions applicable to the taxpayer's total income.
Irpef is applied to the total income that the subject produces.
How is gross tax calculated? The rates established based on the income brackets must be applied to the overall income (net of deductible charges).
The deductions provided for by law must then be subtracted from the gross tax (such as those for children and dependent family members, those for certain expenses incurred during the year, those provided for the type of income).
Any tax credits due must also be subtracted from the gross tax.
To carry out the calculation, it is necessary to follow a series of steps: first, the total income is determined, which includes income from employment, self-employment, pension and other income; once the total income has been obtained, the deductible expenses are subtracted to determine the taxable amount.
These include social security contributions paid, supplementary social security contributions and premiums, periodic allowances for spousal maintenance and charitable donations; once the taxable amount has been determined, the 2023 IRPEF rates are applied based on your income bracket, to determine the gross tax; finally, the IRPEF tax deductions are subtracted from the gross IRPEF to obtain the net IRPEF.
Taxable and total income for IRPEF purposes, the difference When talking about the application of IRPEF rates, the terms taxable income and total income are often used as synonyms , but there is a difference between the two types of income.
The overall income, in fact, is given by the sum of all the income that the subject produces: income from employment to which also add income from any pension, from buildings, from rentals, from self-employment.
All the incomes that a person has are added together to form the total income.
Taxable income, on the other hand, is that on which each individual is required to pay taxes and is obtained by subtracting deductible expenses from the overall income.
Deductible expenses that can be subtracted from overall income are, for example: periodic allowances paid to the ex-spouse; social security contributions; disbursements of money to universities or public research bodies.
If a worker, for example, has a total income of 56,000 euros but is entitled to 12,000 euros of deductions for expenses incurred, the taxable income on which the Irpef will be calculated is equal to 44,000 euros.
Gross Irpef and net Irpef, the difference When talking about Irpef we must make a clear distinction between: Gross Irpef, which is the tax due; Net income tax, which is the tax that the person is required to pay.
The gross Irpef is the tax that is calculated on the taxable income by applying the Irpef rates referring to the income.
Let's take an example.
A worker earns 30,000 euros a year.
The gross income tax is calculated by adding: 23% of the first 28,000 euros (6,440 euros); 35% of the remaining 2,000 euros (700 euros).
The gross income tax is equal to 7,140 euros.
However, the same worker, including deductions from employment, medical expenses incurred, school and university expenses for children and funeral expenses, is entitled to 3,420 euros in deductions.
The net Irpef is calculated by subtracting the applicable deductions from the gross one and, therefore, is equal to 3,720 euros.
Since the individual is an employee and has paid the presumed IRPEF month after month on his pay slip, he will certainly be entitled to a refund when filing his tax return given that the net tax is less than what he paid.
As we have seen, deductions lower the taxable income on which the tax is calculated, while deductions reduce the Irpef due.
Payment and Deadlines The deadlines for paying IRPEF vary depending on the type of taxpayer and the tax regime adopted.
For employees and pensioners, IRPEF is generally withheld directly by the employer or by INPS and paid monthly to the Revenue Agency within the first days of the month following the reference period.
Even in the case of an adjustment, the calculation takes place via withholding tax.
Self-employed workers are instead required to pay the 2023 balance and the first 2024 IRPEF advance on the basis of what is indicated in the tax return, with deadlines that are evolving this year.