Italian income tax calculator: calculate your income after taxes
The Italian income tax calculator is designed to serve a wide range of individual taxpayers in Italy. Whether you are a salaried employee, a freelancer, or a small business owner, this tool can accommodate your unique financial situation and provide precise tax calculations. Here’s a closer look at how different groups can benefit from this tool:
Salaried Employees
For those with a steady paycheck, understanding the deductions, tax credits, and the impact of bonuses or other supplementary income can be challenging. The tax calculator simplifies this process by allowing employees to input their gross income, deductibles, and any applicable credits to see their net tax liability.
Freelancers
Freelancers often have multiple sources of income and face unique tax considerations, such as self-employment taxes and business expenses. The calculator helps freelancers by providing a comprehensive breakdown of their tax obligations, considering both their income and deductible expenses, thus giving a clear picture of what they owe.
Small Business Owners
Small business owners have to juggle various income streams, expenses, and potential tax credits. This tool aids in organizing their financial data and calculating their tax liability, ensuring they comply with tax regulations and optimize their tax situation.
The Italian income tax system is based on progressive brackets ranging from a minimum of 23% up to 43%, on top of which you should also calculate the local Regional and Municipal surcharges.
The following chart outlines the 5 brackets, cornerstone of the Italian income tax system.
The tax bracket allow the Italian taxation to be progressive, therefore the more you earn, the more you pay in tax. Taxation remains the same within the same tax bracket, while changing for the part of income exceeding the upper limit; once your taxable income reaches € 75,000, the applicable tax is flat at 43%.
You must also account for regional and municipal surcharges which vary depending on the municipality in which you claim tax residency.
Calculator for Italian Income Tax Under the New Residents Regime
The New Residents Regime, introduced in 2017, aims to attract wealthy individuals to Italy by offering a favorable tax framework. The regime allows new residents to pay a fixed annual tax on their foreign income, regardless of the actual amount earned. This regime is particularly appealing for those with substantial foreign investments, business interests, or other income streams outside Italy.
Up until 2019, the applicable reduction to new residents was 50%, however, starting from April 30th 2019 the reduction has been boosted to 70% reaching 90% if the taxpayer is resident in any of the following regions:
- Abruzzo
- Apulia
- Basilicata
- Calabria
- Campania
- Molise
- Sardinia
- Sicily
On top of that, if the taxpayer buys a primary residency or claims a family dependent under the age of 18, the income tax reduction can be further extended for 5 years.
Key Features of the Regime
Fixed Annual Tax
Under the New Residents Regime, qualifying individuals are required to pay a fixed annual tax of €100,000 on their foreign-sourced income. This flat tax replaces the standard progressive tax rates that can be as high as 43% for top earners.
Extended Benefits for Family Members
Family members of the main applicant can also benefit from this regime by paying an additional €25,000 per person annually. This makes it a highly advantageous option for wealthy families considering relocation.
You can read more about this regime here.
Income Tax Calculator
Income tax deductions
You can further reduce your taxable income if you can claim tax deductible expenses, which are divided into two categories:
- Tax deductible Items against income;
- Tax deductible Items against gross tax.
The first ones reduce your taxable income; therefore, the tax savings is equal to the marginal tax rate paid.
In this category we find:
- Mandatory Social Security Contribution (INPS);
- Voluntary Social Security Contribution (INPS);
- Voluntary Private Pensions Contribution;
- Spouse alimony;
- Donations to NGO and non-profit organizations.
Assuming you are a top rate taxpayer and you decide to contribute € 2,000.00 towards your voluntary private pension fund, you will then save € 860.00 on your tax bill claiming a refund (€ 2.000,00 * 43%).
The second ones reduce your gross tax. In this case the deductible items are multiplied by a coefficient set by the law ranging from 19% up to 110% of the qualifying expense, on top of the tax deduction available for employment or self-employment income as well as family dependents.
In this category we have, among others:
- Health expenses;
- Vet expenses;
- School expenses;
- Family dependents;
- Main residency loan interests paid;
- House renovation expenses;
- Energy efficiency house improvements;
- Superbonus 110%
- Furniture purchase expense;
- Lease paid.
Other Italian income tax regimes
Italy includes various optional tax regimes providing more favourable tax treatment to certain categories of taxpayers such as:
- Forfettario regime for freelancers
- New pensioner’s 7% tax regime
- HNWI Italian flat tax
