The August and September salaries were higher than usual due to the application of new IRS tables with retroactive effects. However, in October, the scenario has changed.
The issue at hand is the application of the new IRS tables, which essentially provide more monthly income to workers. This relief was more pronounced in August and September due to retroactive adjustments.
Now, “from October onward, the ‘normal’ IRS rates, which are still lower than those previously in effect, will apply, thereby continuing to provide more disposable income,” the government assured.
What has changed?
With the new tables, the rate for the first bracket drops from 13% to 12.5%, the second decreases from 16.5% to 16%, the third falls from 22% to 21.5%, the fourth is reduced from 25% to 24.4%, the fifth lowers from the current 32% to 31.4%, the sixth decreases from 35.5% to 34.9%, the seventh goes from 43.5% to 43.1%, and lastly, the eighth declines from 45% to 44.6%.
The rate for the top income tier remains at 48%.
Although there is no change in this last tier, the proposed IRS reduction by the government covers all taxpayers liable to pay taxes, due to the progressive nature of the table. The decrease in previous brackets means that new tier taxpayers also benefit from the easing.
Was your August salary higher than usual? This is due to the application of the new IRS tables, which increase workers’ monthly income. This relief was more noticeable in August and September because of retroactive adjustments.
How much can be saved with the IRS changes this year?
In practice, the impact of the 2025 changes depends on each household’s tax situation, but simulations released by the Ministry of Finance provide some insights.
A couple with two children, both earning 1,500 euros monthly, will see an annual reduction of 165 euros in IRS payments compared to the expectations in the OE2025, according to simulations from the Ministry of Finance.
A simulation for a couple without dependents envisages an annual tax saving, compared to current levels, of between 67 euros (when each earns 1,000 euros gross monthly) and 414 euros (when each has a salary of 3,000 euros).
For a single taxpayer without dependents, the annual tax savings compared to OE2025 range from 34 euros for salaries of 1,000 euros to 207 euros for salaries of 3,000 euros.
Considering a pensioner with a pension up to 1,000 euros (gross), the annual tax savings compared to OE2025 will be 34 euros, rising to 83 euros for pensions of 1,500 euros, 124 euros for pensions of 2,000 euros, 166 euros for pensions of 2,500 euros, and 208 euros for pensions of 3,000 euros.
On another note, PwC simulations reveal that the IRS reduction will allow a single, childless worker with a salary of 1,000 euros to pay 34 euros less in annual taxes than with the current IRS table.
