Italian income tax calculator
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.
New residents regime
New residents of Italy enjoy a reduction in their taxable income arising from employment or self-employment ranging from 50% up to 90%, starting from the year 2016 lasting for a minimum of 5 tax years..
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:
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.
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