Technical analysis of the proposed change in the IRPF table, distinction between calendar year and fiscal year and the fiscal effects foreseen in the spending cut package.
The discussion about income reform and updating the Personal Income Tax (IRPF) exemption range is central to family tax planning and the projection of Brazilian public accounts. The promise to exempt taxpayers who receive up to R$5,000 per month is part of a set of fiscal adjustment and tax justice measures presented by the economic team. For taxpayers and analysts, the main doubt lies in the application schedule: understanding when the measure effectively comes into force and in which annual adjustment declaration it will take effect is crucial for the long-term financial organization.
The concept and validity of the measure
The exemption proposal for those earning up to R$5,000 is not just a monetary update of the table, but a restructuring of the tax burden on income. Technically, the measure aims to expand the exemption range (zero rate), which benefits not only those who earn up to the stipulated ceiling, but reduces the effective rate of all taxpayers who earn above this amount, due to the progressiveness of the tax.
To answer the central planning question — whether the income tax exemption for those earning 5,000 is valid for the 2026 or 2027 declaration — it is necessary to differentiate two fundamental accounting concepts:
Calendar year: Refers to the year in which the income is received and the tax-generating events occur (e.g. salary received from January to December 2026).
Exercise: Refers to the year in which the Annual Adjustment Declaration is submitted to the Federal Revenue Service (e.g. the declaration made in 2027, referring to 2026 earnings).
According to the design of the proposal presented by the federal government at the end of 2024, the intention is for the new exemption range to come into force in the calendar year 2026. If approved by the National Congress in these terms, withholding tax (the discount on the paycheck) would no longer occur for those earning up to this amount from January 2026. Consequently, the final adjustment of this information would occur in the 2027 declaration.
Influencing factors and legislative procedure
The implementation of this measure is not automatic and depends on complex macroeconomic and political variables. The Fiscal Responsibility Law (LRF) requires that any revenue waiver — as is the case of increasing the IR exemption — be accompanied by an equivalent financial compensation measure or expense cut.
The main vectors that influence the approval and maintenance of this proposal include:
Tax compensation: The government linked the viability of this exemption to the creation of minimum taxation for individuals with very high income (millionaires), aiming for fiscal neutrality.
Approval in Congress: As it is a change in tax legislation, the measure needs to be approved by both legislative houses (House and Senate) in the year before it comes into force to respect the principle of precedence, although the IR has the exception of being able to be valid in the same year if it benefits the taxpayer (but the compensation, if it is a tax increase for others, requires precedence).
Space in the Budget: The inflation projection and GDP growth affect federal revenue, which can facilitate or hinder the absorption of the fiscal impact of the measure, estimated at tens of billions of reais.
Current scenario and tax data
Currently, the Brazilian tax scenario operates with an exemption range that was readjusted to two minimum wages in 2024 (considering the simplified discount), reaching amounts close to R$2,824.00. The increase to R$5,000.00 represents a significant jump, covering the vast majority of salaried workers in the country.
Data from the Federal Revenue indicate that the IRPF table has accumulated a large inflation gap in recent decades. The proposed correction seeks to mitigate this effect, returning purchasing power to the middle and lower classes. However, market analysts are cautiously observing the impact on revenue. The Ministry of Finance’s strategy is to carry out a structural reform where the loss of revenue at the base of the income pyramid is financed from the top, maintaining the fiscal balance necessary for the stability of public debt.
FAQ
Does the exemption take effect immediately after approval?
No. Tax laws generally respect the principle of annual or nineagesimal precedence. The government’s proposal stipulates that it will come into force in 2026.
If the exemption starts in 2026, when do I file the declaration?
If the rule applies to income received from January 2026, the adjustment to these values will be made in the declaration sent between March and May 2027. Therefore, in the 2026 declaration (referring to 2025), the old rules still apply.
Will those who earn more than R$5,000 also benefit?
Yes. Due to the progressiveness of the table, the salary portion up to R$5,000 would be exempt for everyone, reducing the total tax payable or increasing the refund, even for those with higher incomes.
The proposed exemption of up to R$5,000 in 2026 represents a relevant structural change in income taxation in Brazil, with the potential to increase family consumption, but which requires strict fiscal compensation to avoid compromising the primary deficit targets. The implementation of the measure depends on legislative approval and the implementation of compensatory taxes on large fortunes.
Disclaimer: This content is for informational and educational purposes only, based on government proposals available at the date of publication. It does not constitute tax, legal advice or investment recommendations. Tax legislation is subject to constant change; consult an accountant or specialized professional for analysis of specific cases.
