The new IRS brackets for 2025 were published in Diário da República, with significant updates that aim to adapt income limits to inflation. The main objective of these changes is to ensure greater tax justice, especially for taxpayers with low and medium incomes. Find out more in this article.
New IRS Ranges for 2025
While the number of IRS brackets remains fixed at nine, income amounts have been adjusted to prevent modest salary increases from resulting in higher taxation. The updated limits are as follows:
- 1st level: up to €8,059 – 13% rate
- 2nd tier: from €8,059 to €12,160 – tax of 16.5%
- 3rd level: from €12,160 to €17,233 – 22% tax
- 4th level: from €17,233 to €22,306 – 25% tax
- 5th level: from €22,306 to €28,400 – 32% tax
- 6th level: from €28,400 to €41,629 – 35.5% tax
- 7th level: from €41,629 to €44,987 – 43.5% tax
- 8th level: from €44,987 to €83,696 – 45% tax
- 9th level: above €83,696 – rate of 48%
How these changes affect taxpayers
The update of the levels translates into a reduction in the tax burden for many Portuguese people. The adjustment aims to prevent small salary increases, of up to 4.6%, from pushing taxpayers into a higher bracket, which would result in higher taxation. Thus, middle and low income earners benefit from tax relief, protecting their purchasing power.
For example, a taxpayer with taxable income of €15,000 may pay less tax compared to the previous year, resulting in annual savings.
Strategies to take advantage of IRS changes
To maximize the benefits of the new rules and pay only fair tax, consider the following suggestions:
1. Evaluate your annual income: Compare your income with the new brackets to predict your tax burden.
2. Take advantage of tax deductions: expenses for health, education, housing or dependents can be deducted. Make sure to register all invoices on the e-Fatura portal.
3. Adjust withholding tax: Confirm that your employer is correctly applying the withholding rate, especially if you have children or other specific situations.
4. Report changes to the household: changes such as the birth of children or changes in marital status must be communicated to update your tax situation.
5. Plan salary increases: If you anticipate an increase in income, consider whether this will put you in a higher bracket and consider alternatives such as non-taxable allowances.
With these strategies, you will be able to manage your IRS more efficiently, ensuring maximum tax benefit in 2025.
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