THEInland Revenue has published the circular no. 2/E of 6 February, which analyzes in detail the legislative decree of 30 December 2023, n. 216, concerning the first form of revision of personal income tax, within the scope of enabling law on tax reform. The circular provides some clarifications on review of tax deductions, outlined in Article 2 of the decree.
Changes valid for 2024 only
First of all, it must be highlighted that the changes made by the first Irpef revision form will apply exclusively for the year 2024. For subsequent years, the implementation of further decrees implementing the tax delegation will be necessary complete the regulatory framework. The definitive regulation, therefore, will follow the principles established by article 5 of law 111/2023, which provides for the reorganization of deductions, brackets, rates and Irpef deductions, taking into account variables such as the composition of the family unit, the situation housing, health, education and others.
Linear deduction above 50 thousand euros
In the context of the review of deductions, the first implementing decree of the Irpef reform adopts a temporary horizontal solution. Article 2 of the Decree introduced changes to the rules on deductions for expenses, providing for a reduction of 260 euros for taxpayers with a total income exceeding 50.000 euros.
This solution involves a linear cutting of the deductions at 19%, determined according to article 15, paragraph 3-bis, of the TUIR, with the exception of those relating to healthcare expenses, donations to political parties and insurance premiums for the risk of calamitous events.
In practice, a taxpayer with a total income exceeding 50.000 euros in 2024, and who has 19% deductions (with the exception of those for health expenses) for a total of 1.000 euros, will obtain a benefit of 740 euros during the tax return, after suffering a reduction of 260 euros. This reduction acts as a kind of threshold and can be particularly harmful when even a modest increase in income above 50.000 euros leads to an increase in tax exceeding the additional income.
Reduced deductions for incomes above 120 thousand euros
The circular mainly highlights the application of the exemption according to paragraph 3-bis of article 15 of the TUIR. This provision establishes that the 19% deductions are not available to taxpayers with a total income of 240.000 euros up and come reduced for those with incomes between 120.001 euros and 239.999 euros.
To determine the amount due, the ratio between the amount of 240.000 euros, less the total income, and 120.000 euros must be calculated. In other words, for those who have a total income exceeding 120.000 euros, the reduction must be applied to the deduction already reduced from the gross tax as established in article 15, paragraph 3-bis, of the TUIR.
The circular specifies that the 260 euro cut must be applied to the deduction already reduced due to this legislation.
For example, a taxpayer with a total income of 144.000 euros and deductions for health expenses of 700 euros would obtain a net deduction of 1.100 euros if the other deductions at 19% were for 1.000 euros. In the case of 19% deductions for 325 euros, the net deduction would be 560 euros.
The three new Irpef rates
The Decree introduces a significant remodulation of rates and income brackets for Irpef, limited to the 2024 tax period. According to the provision, for the calculation of the gross tax in 2024, new rates and income brackets are applied instead of those previously established by the Consolidated Law on Income Taxes.
Le new rates are the following:
- 23% for incomes up to 28.000 euros,
- 35% for incomes above 28.000 euros and up to 50.000 euros,
- 43% for incomes exceeding 50.000 euros.
