Rates and calculation of the new Irpef 2022: here are the news on brackets and deductions

Rates and calculation of the new Irpef 2022: how the brackets and deductions change

The personal income tax rates have changed from 1 January 2022: the Legislator’s intention is to compress the brackets and reduce the rates of the medium-low brackets. But the local authorities will have until March 31 to adapt the surcharges to the new 4-rate system.

In fact, the new IRPEF rates (and brackets), in force since 2022, should be as follows:

1) from 0 to 15,000.00 euros: 23%;

2) from 15.00.01 to 28.000.00 euros: 25%;

3) from € 28,000.01 to € 50,000.00: 35%;

4) from € 50,000.01 onwards: 43%

Ultimately, the penultimate group stops at 50 thousand euros instead of 55 thousand euros, the 55 thousand – 75 thousand euros band currently taxed at 41% disappears and the two intermediate rates of 27% and 38% are reduced, respectively, to 25% and 35%.

The new rates, therefore, entered into force on January 1, 2022, but local authorities will have until March 31 to adapt the additional rates to the new 4-rate system.

The average discount is € 264 per year. But it takes time to adjust the payroll software and the concrete effect will arrive only in March when there will be the balance also for the previous two months.

The old IRPEF taxation system, provided for the traditional rates by income brackets: these are 5 rates which correspond to as many income brackets and precisely:

1) from 0 to 15,000.00 euros: 23%;
2) from € 15.00.01 to € 28,000.00: 27%;
3) from 28,000.01 to 55,000.00 euros: 38%;
4) from 55,000.01 to 75,000.00 euros: 41%;
5) from 75.00.01 onwards: 43%.


Average reduction of 264 euros for 27.8 million taxpayers

The tax reform that will take effect in 2022 will lead to an average tax reduction for 27.8 million taxpayers of 264 euros but the advantage will be greater for medium-high incomes, those between 42 thousand and 54 thousand, who will have to pay the tax authorities 765 less on average. The calculation comes from the Parliamentary Budget Office which in a Flash study points out that 14.1% of resources are concentrated in this more affluent group, which is 3.3% of taxpayers. In fact, this is the audience that did not benefit from the so-called Renzi bonus (which ran out completely at 40 thousand euros of income) and in part benefits from the reduction in the rate from 38% to 35% (up to 50 thousand euros while between 50 thousand and 55 thousand yes goes directly to 43%). In fact, the study points out, executives will have a tax reduction of 368 euros, more than double, in absolute terms, the average of workers, equal to 162 euros, while clerks will have a tax cut of 266 euros.

The impact of the reform on individual taxpayers

The study analyzes the impact of the reform also by looking not at individual taxpayers but at the family unit, clarifying that 20% of the poorest families are “substantially excluded” from benefits due to fiscal inadequacy. In practice, 50% of households in less favorable economic conditions “benefit from about a quarter of the total resources (about 1.9 billion), while the richest 10% benefit from more than a fifth of the resources (1.6 billion)” . 20% of households in less favorable economic conditions are in fact excluded from the scope of application of the personal income tax due to the high level of minimum taxable income and therefore are not involved in the revision of the personal income tax. “This implies – explains the Upb – that if future social policies want to further support the incomes of the poorest families, they will have to rely on instruments other than personal income tax, such as direct monetary transfers or negative tax mechanisms”. According to Upb estimates, when fully operational, the total of interventions involves a reduction in the levy of approximately 264 euros per capita (approximately one percent of disposable income) for 27.8 million taxpayers, equal to approximately two thirds of the total.

The total cost, when fully operational, estimated at € 7.3 billion, does not differ significantly from the valuations reported in the Technical Report (approximately € 7 billion). The tax change, on the other hand, is indifferent for over 14.5 million taxpayers, while there is an increase in tax for approximately 372,000 individuals, on average equal to 188 euros per capita, for a total of 70 million euros. But it should be remembered that there is a safeguard clause that concerns only those who had the personal income tax bonus activated by Renzi, therefore with low incomes. Indeed, for incomes up to 15 thousand euros, the Renzi bonus of 100 euros remains, that remains, at least in part, even up to 28 thousand euros to avoid anyone losing out with the mix of new personal income tax, deductions and absorption of the bonus.

Deductions according to income

In terms of overall cost, the redesign of rates and brackets represents the predominant intervention that absorbs approximately 79% of the distributed resources (5.8 billion) while the remaining 21% (1.5 billion) is equally divided between the redesign from the deductions for dependent work and deductions for retired and self-employed persons. In the face of a average tax reduction for individuals who have an advantage of 264 euros, for about half of them the benefit is less than 185 euros, while one in 8 taxpayers (12.5 per cent) benefits for more than 500 euros.

For taxpayers with an income of less than 12,000 euros, the average benefit is significantly reduced due to fiscal incompetence. The first two income classes, where approximately 36.9% of taxpayers are concentrated, benefit from approximately 6.7% of total resources (approximately 500 million). The Uil underlines that the Upb estimates “mislead” the tax reform launched by the Government and confirm the analysis of the union “on the inequity and ineffectiveness of the intervention.” “85% of workers and pensioners, says Confederal Secretary Domenico Proietti – it receives only a few crumbs. Uil will continue its battle for a real tax cut for employees and retirees and for an epochal turning point in the fight against tax evasion “.

The new system of deductions for work

The current structure of deductions for work remains standing, which are distinguished according to the “type” of work and, more precisely:

– deductions for employee work;

– pension deductions;

– deductions for other types of income (self-employment, business, other income).

The new amounts can be summarized as follows:

1) Deduction for income from employment (Article 13, paragraph 1, letter a), b) and c) Presidential Decree no. 917/1986):

– for income up to 15,000 euros: deduction of 1,880 euros (not less than 690 euros or, if on a fixed-term basis, not less than 1,380 euros);

– for income over 15,000 euros and up to 28,000 euros: 1,910 + 1,190 *[(28.000-reddito complessivo)/(28.000-15.000)]

– for income over € 28,000 and up to € 50,000: 1,910 *[(50.000-reddito complessivo)/(50.000-28.000)]

– for income over 50,000 euros: 0

The aforementioned amount increases by 65 euros for income from 25,000 euros to 35,000 euros.

2) Deduction for pension income (Article 13, paragraph 3, letter a), b) and c) Presidential Decree no. 917/1986):

– for income up to € 8,500: deduction of € 1,955 (not less than € 713);

– for income over 8,500 euros and up to 28,000 euros: 700+ (1,955-700) *[(28.000-reddito complessivo)/(28.000-8.500)]

– for incomes over 28,000 euros and up to 50,000 euros: 700 *[(50.000-reddito complessivo)/(50.000-28.000)]

– for income over 50,000 euros: 0

The aforementioned amount increases by 50 euros for income from 25,000 euros to 29,000 euros.

3) Deduction for other income (art. 13, paragraph 5, lett. A) and b) Presidential Decree no. 917/1986):

– for income up to € 5,500: deduction of € 1,265;

– for income over 5,500 euros and up to 28,000 euros: 500+ (1,265-500) *[(28.000-reddito complessivo)/(28.000-5.500)]

– for incomes over 28,000 euros and up to 50,000 euros: 500 *[(50.000-reddito complessivo)/(50.000-28.000)]

– for income over 50,000 euros: 0

The aforementioned amount increases by 50 euros for income from 11,000 euros to 17,000 euros.

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