Italy's 2026 Tax Rates: Major Changes and How They Work

The Budget Law approved in December 2025 (Legge di Bilancio 2026) delivered the broadest package of Italian tax changes in years. The middle IRPEF bracket drops from 35% to 33%. Crypto capital gains rise to 33% with no exemption threshold. IRAP increases by 2% for most businesses. A new debt settlement program covers unpaid taxes going back to 2000. Whether you are an Italian resident, an expat, or a non-resident with income or assets in Italy, every one of these changes affects how you file and what you owe.

Personal Income Tax (IRPEF) Reforms

The centerpiece of the 2026 changes is the reduction of the second IRPEF bracket (scaglione). The rate applied to income between €28,001 and €50,000 drops from 35% to 33%. The updated brackets:

Taxable Income	2025 Rate	2026 Rate
Up to €28,000	23%	23%
€28,001 to €50,000	35%	33%
Over €50,000	43%	43%

The maximum tax saving is €440 per year, realized at the €50,000 income mark: 2% reduction applied to €22,000 of taxable income in the second bracket. Due to the progressive structure of IRPEF, the benefit carries through to higher earners as well, with deduction mechanisms extending the impact to incomes up to €200,000.

No-Tax Thresholds

The income levels below which no IRPEF is owed remain unchanged from the 2024 reform:

• €8,500 for employees and pensioners
• €5,500 for self-employed workers

If you have dependent family members or deductible expenses, the effective no-tax area can climb well beyond these figures, sometimes exceeding €15,000 depending on your specific situation.

For a broader view of how IRPEF fits into Italy's planned tax trajectory, see our earlier analysis of Italy's income tax landscape in 2026 and the 2025-2026 reform overview for expats.

Employment Incentives

The 2026 Budget Law introduced several measures aimed at boosting take-home pay for employees:

Overtime and Shift Bonuses

Employees with gross annual incomes up to €40,000 benefit from a flat 15% substitute tax on overtime, holiday, and night-shift bonuses throughout 2026. This replaces the standard IRPEF rates and local surcharges (addizionali regionali e comunali) that would otherwise apply, resulting in a meaningful increase in net pay for workers taking on additional shifts.

Contractual Wage Increases

Contractual pay raises negotiated between 2024 and 2026 are taxed at a preferential 5% rate for employees with annual incomes up to €33,000. This incentivizes collective bargaining and rewards workers who secured salary increases during this period.

Performance Bonuses

The substitute tax on performance bonuses (premi di risultato) and profit-sharing schemes up to €5,000 dropped from 5% to 1%. For an employee receiving the maximum €5,000 bonus, this means paying €50 in tax instead of €250, a direct €200 improvement in take-home pay.

Investment Taxation Changes

The 2026 Budget Law creates a wider spread between tax rates on different asset classes. For a detailed treatment of capital gains taxation in Italy, see our comprehensive guide.

Crypto-Assets: 33% with No Exemption

Capital gains on cryptocurrency, tokens, and NFTs are now taxed at 33%, up from the previous 26%. The former €2,000 annual exemption threshold has been abolished, meaning all realized gains are now taxable regardless of amount. Italy does not offer preferential rates based on holding period: any realized gain is fully taxable at 33%.

This makes Italy one of the more expensive EU jurisdictions for crypto trading. For residents with worldwide investment income, all foreign-held crypto gains must also be declared.

Stocks, ETFs, Bonds, and Funds

Most traditional financial instruments remain taxed at the established 26% substitute tax on capital gains. This applies to:

• Listed and unlisted shares
• Exchange-traded funds (ETFs)
• Mutual funds and UCITS
• Corporate bonds

Government Bonds

Italian government securities continue to benefit from the reduced 12.5% rate. This covers BTP, BOT, CCT, CTZ, postal savings bonds (buoni fruttiferi postali), and select sovereign securities from countries on Italy's "white list." The preferential rate makes government bonds among the most tax-efficient fixed-income investments available to Italian tax residents.

2026 Investment Tax Summary

Asset Class	Tax Rate	Change from 2025
Crypto-assets	33%	Up from 26%; €2,000 exemption removed
Stocks, ETFs, corporate bonds	26%	No change
Government bonds (BTP, BOT, etc.)	12.5%	No change
Tobin tax (financial transactions)	0.04%	Doubled from 0.02%

Financial Transaction Tax (Tobin Tax)

Italy's Imposta sulle Transazioni Finanziarie doubled from 0.02% to 0.04%. While the percentage appears small, it compounds significantly on high-frequency and high-volume trading. The tax applies to purchases of Italian-listed shares and to derivative transactions. Active traders and institutional investors should factor this into their cost calculations for the 2026 tax year.

Corporate and Business Taxation

IRAP Increase

The regional production tax (IRAP, Imposta Regionale sulle Attività Produttive) increased by 2% for most businesses. To soften the impact, the Budget Law provides a temporary deduction of €90,000 on the increase for the years 2027 and 2028. This gives businesses a two-year cushion before the full rate increase takes effect.

Banks and Insurance Companies

Financial institutions face steeper measures:

• Banks: IRAP rates increased by an additional 2% beyond the standard hike. Deductibility of prior-year losses drops to 35% in 2026, then rises slightly to 42% in 2027. The reduced loss deductibility directly affects bank profitability and may filter through to consumer banking fees.
• Insurance companies: IRAP rates also increased by an additional 2%. The tax rate on RC auto (compulsory motor vehicle liability insurance) rises to 12.5%. This is expected to push up insurance premiums for policyholders.

New Business Withholding Tax

Starting in 2028, a new withholding tax on business-to-business payments takes effect at 0.5%, increasing to 1% from 2029 onward. While not yet active, businesses should begin planning for the cash flow implications. This measure affects both Italian and foreign companies operating in Italy.

Rottamazione Quinquies: Tax Debt Settlement

The 2026 Budget Law launches the fifth iteration of Italy's tax amnesty program, covering unpaid taxes and social security contributions accumulated between 2000 and 2023. Eligible taxpayers can settle their debts under favorable terms:

• Single installment: Full payment by July 31, 2026
• Installment plan: Up to 54 bi-monthly payments stretching through May 2035, with an annual interest rate of 3%

The program excludes debts arising from direct audit actions (cartelle da accertamento) but covers most other outstanding tax and contribution liabilities. For taxpayers with older debts, this represents a significant opportunity to clear their position with the Agenzia delle Entrate at a manageable cost.

Payments are made via the F24 form. If you have outstanding Italian tax obligations, consult with a commercialista to determine whether your debts qualify before the July 2026 deadline.

Consumer-Facing Tax Changes

Several measures in the 2026 Budget Law affect everyday spending:

Change	Detail
Non-EU small packages	New €2 levy on packages from outside the EU valued under €150
Meal vouchers	Daily tax-free limit raised from €8 to €10
Cigarette excise	Increased
Diesel excise	Increased
Sugar tax	Postponed (not implemented in 2026)
Plastic tax	Postponed (not implemented in 2026)

The €2 package levy targets low-value imports from non-EU e-commerce platforms, aiming to level the competitive playing field for domestic retailers.

How the 2026 Rates Work in Practice

Progressive IRPEF Calculation

Italy's personal income tax is applied per bracket, not as a single rate on total income. An employee earning €45,000 pays:

• 23% on the first €28,000 = €6,440
• 33% on the remaining €17,000 = €5,610
• Total IRPEF: €12,050 (before deductions and surcharges)

Under the old 35% rate, that same employee would have owed €12,390, a difference of €340. Family status, dependent children, and deductible expenses reduce the taxable base before these rates are applied.

Investment Substitute Tax

For investors, capital gains taxes are typically applied as a substitute tax (imposta sostitutiva), withheld at source by Italian brokers, banks, or financial institutions. If you use an Italian intermediary, your net gains arrive already taxed. If you use a foreign broker or hold investments abroad, you must self-report gains in the relevant sections of your tax return (Modello Redditi) and via the Quadro RW for foreign asset disclosure.

Corporate Impact

The combination of higher IRAP rates and reduced loss deductibility for banks narrows corporate margins. For small and medium businesses, the €90,000 temporary IRAP deduction in 2027 and 2028 provides short-term relief, but planning for the full rate increase beyond that window is essential. The forthcoming business withholding tax (2028 onward) will also require adjustments to invoicing and payment workflows.

What This Means for Expats and Non-Residents

If you are a foreign national living in Italy, these changes affect your 2026 tax position:

• Employed expats benefit from the lower 33% IRPEF bracket and the overtime/shift bonus flat tax if they earn under €40,000
• Investors holding crypto-assets face a steeper 33% rate with no exemption threshold
• Freelancers and self-employed workers under the regime forfettario are not directly affected by the IRPEF bracket change (the forfettario uses its own substitute tax), but should note the IRAP increase if operating as a business entity
• Non-residents with Italian investments should review the updated rates on their capital gains and ensure correct reporting
• Those with outstanding Italian tax debts from 2000 to 2023 should evaluate the Rottamazione Quinquies program before the July 2026 deadline

For a full picture of how Italy's tax system applies to remote workers and digital nomads specifically, see our Digital Nomad Visa guide and our overview of tax incentives for remote workers.

File Under the New 2026 Rules with Confidence

Italy's 2026 tax changes touch nearly every category of income, investment, and business activity. Getting the rates wrong on your return is an avoidable mistake. ItalianTaxes.com provides a technology-driven platform to file, calculate, and pay your Italian taxes online, fully updated for the 2026 Budget Law, in English, and designed for expats, non-residents, and international professionals.

Ready to file? Create your free account at ItalianTaxes.com and stay compliant with Italy's new tax rates.