The State Budget proposal for 2026 (OE2026) has been unveiled, promising new benefits for families. The government states, “OE2026 embodies the commitment to increasing household income and improving living conditions for Portuguese citizens,” as noted on the official document’s dedicated site.
What’s Changing?
The government highlights several points, including:
- Taxes: Continuing the policy of tax reduction, this budget introduces additional IRS relief for families. Marginal rates between the 2nd and 5th brackets will be reduced. OE2026 will include a 0.3 percentage point reduction in the IRS rate between these brackets, envisaging an investment of 110 million euros. Additionally, IRS brackets will be updated by 3.5% (above the 2.1% forecast for 2026 inflation), and the minimum subsistence level will be adjusted, ensuring that the national minimum wage remains IRS exempt.
Housing: Portugal is grappling with a housing crisis characterized by insufficient supply and incomes that cannot keep pace with sharply rising housing prices. The 2026 State Budget reflects the XXV Government’s strategic vision to ensure accessible and quality housing for all. To boost public and private supply, the government plans to: Provide 59,000 homes over the next six years (33,000 new units under the Recovery and Resilience Plan – PRR); Construct 12,000 houses for the Rental Support Program through a loan agreement with the European Investment Bank (EIB); Increase public housing supply, with 930 million euros allocated for public promotion and rehabilitation programs to cover 22,000 people by 2026; Mobilize public assets (properties and land) for housing projects; Promote affordable rental supply, strengthening protection for families in particularly vulnerable situations. From a fiscal standpoint, several incentives will be introduced, such as: Applying a reduced VAT rate on housing construction for sale or rental at moderate prices; Encouraging leasing and sale of properties at moderate values through tax incentives, including: An increase to 900 euros in the IRS deduction for housing rental costs at moderate prices by 2026. A reduction in the IRS rate for landlords, from 25% to 10%, on rental contracts of properties at moderate rents; Eliminating the IRS capital gains on the sale of homes if the amount is reinvested in properties for moderate rental value; Introducing a temporary exemption of IMT and IMI for properties intended for rental at moderate prices. In addition to promoting supply, bureaucratic barriers in the real estate market will be addressed, particularly by streamlining the licensing processes for house construction and revising Municipal Master Plans (PDM).
Social Support: Portugal’s economic and social development model faces structural challenges requiring profound reforms. The government has initiated a transformation cycle, focusing on labor valorization, poverty reduction, birth rate promotion, and Social Security modernization. Objectives include: Revisiting parental leave schemes and related parental support measures to balance work and family life between mothers and fathers; Approving the new National Strategy for the Inclusion of People with Disabilities and its Action Plan, set to start in 2026, which will make supports more effective; Valuing and supporting informal caregivers with the creation and implementation of a caregiver allowance and reinforcing their training and certification; Strengthening partnerships with private, cooperative, social, and solidarity sectors, especially in pre-school education, to increase enrollment in this education level.
Salaries: The XXV Government will drive wage growth, continuing the previous administration’s trajectory, with a proposed minimum wage increase to 1,100 euros by the end of the legislature. This year, the minimum wage will rise to 920 euros, a 5.7% increase. The subsistence minimum will also be updated, ensuring this salary remains IRS exempt. Concurrently, public administration careers are being valued. Alongside career reviews, public administration workers will receive a 56.58 euro or 2.15% increase in 2026, as per the Pluriannual Valuation Agreement. The government intends to extend this agreement, proposing a 2.30% salary update, with a minimum of 60.52 euros, for 2029.
