In 2026, Portuguese retirees will be able to benefit from tax changes that increase disposable income. The State Budget proposal foresees reductions in the IRS and adjustments in social supplements, measures that could directly influence the pensions of thousands of citizens.
Fee reduction and exemption limits
According to the State Budget proposal, the Government’s official document on public finances and budgetary policies, IRS rates will be reduced by 0.3 percentage points in the intermediate brackets, from the second to the fifth.
This measure is intended to ease the tax burden on pensioners with average pensions. According to the same source, although the drop appears small, it translates into a few tens of euros per year, depending on taxable income.
The minimum existence, which determines the portion of income not subject to IRS, rises to 12,880 euros per year, or 920 euros per month. Retirees with pensions below this amount may be exempt from IRS, as long as they do not have other sources of income that exceed the legal limits.
Furthermore, the Budget also foresees an increase of 40 euros in the Solidarity Supplement for the Elderly in specific cases, reinforcing the disposable income of those who depend solely on the pension.
How much can retirees save
To understand the real impact, 0.3 percentage points on taxable income corresponds to an approximate saving of 30 to 40 euros per year for those who earn between 10,000 and 12,880 euros per year.
These calculations are simplified and indicative only, as the IRS is progressive and subject to deductions and withholdings. Retirees with other sources of income should consider the combined effect on taxation.
Steps to follow
Experts advise that retirees confirm that their pension is below the exemption limit and that other income does not cancel out the tax advantage.
Updating the data guarantees that withholding taxes are correct and avoids surprises when paying the IRS. According to the same source, it is also recommended to regularly review eligibility for the Solidarity Supplement and other social support.
Measures subject to change
It is important to remember that this is a State Budget proposal still subject to changes during the parliamentary debate. The pension update and tax relief measures will only come into force after final approval.
According to the proposal presented by the Government of Portugal and available on the official website, changes to IRS levels and the minimum existence should benefit thousands of pensioners from next year onwards.
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