Tax breaks for the middle class, with automatic benefits for higher incomes as well, support for divorced couples, a reduced increase in the retirement age, and a push for supplementary pensions. But there will also be tax increases on cigarettes, diesel fuel (offset by the decline in gasoline prices), and car insurance. The final approved budget, originally costing €18 billion and now over €22 billion, brings with it a long list of changes. Some of these have sparked heated political debate, especially within the majority. The first stumbling blocks were the banks' contribution, short-term rentals, and the taxation of dividends. Then came gold, and finally pensions. Here is a summary of the main changes.
INCOME TAX DISCOUNT AND BENEFITS - The highlight is the IRPEF reduction for incomes up to €50,000, with the second rate dropping from 35% to 33%. A reduced 5% tax rate is applied to contractual increases, valid for incomes up to €33,000 and for contracts renewed from 2024 to 2026. The substitute tax rate for performance bonuses and profit-sharing schemes up to €5,000 is reduced to 1%. The tax-free threshold for meal vouchers is increased from €8 to €10.
PENSIONS - While the government initially focused on personal income tax (IRPEF), the majority has instead devoted all its efforts to the grand finale of pensions. The retirement age will rise by one month instead of three in 2027, then by three months in 2028. Resources for early retirement for early and arduous workers are being reduced, and the "Women's Option" (Opzione Donna) is being abolished, its extension even being rejected as an agenda item. Inflation adjustments are coming, but only for the lowest pensions. For young new hires, automatic enrollment in supplementary pension plans will come into effect starting July: they will have 60 days to decide otherwise.
BUSINESS INCENTIVES - The hyper-depreciation for investments in capital goods has been extended until September 30, 2028. The measure is increased by 180% for investments up to €2.5 million, by 100% for investments between €2.5 million and €10 million, and by 50% for investments between €10 million and €20 million for investments in goods produced in the EU. Resources are also available for the Transition 5.0 tax credit (€1.3 billion) and the ZES (€532.64 million). The New Sabatini Law has also been refinanced.
SCRAPPING - Debts accrued from January 1, 2000, to December 31, 2023, can be repaid through the new simplified settlement of debt collection notices, which provides for a nine-year payment plan with 54 bimonthly installments. The interest rate on the installments will be 3%.
NEW TAXES - As a move against Shein and Temu, and more importantly as a new measure of protection, a €2 contribution will be introduced for shipments worth less than €150 arriving from third-party countries. The increase in excise duties will increase the price of cigarettes by up to 15 cents per pack, while the tax rate on additional car insurance coverage, such as driver injury and roadside assistance, will rise to 12.5%. The Tobin Tax, the tax on financial transactions, will double from 0.2% to 0.4%. Municipalities will also be able to increase the tourist tax. Finally, excise duties on diesel fuel will increase, offset by a decrease in gasoline. SHORT-TERM RENTALS - This was a major issue, especially during the initial phase of parliamentary scrutiny. Following the amendments introduced by the Senate, the reduced rate of 21% on the first rented property and 26% on the second property will be confirmed in 2026, making it mandatory to qualify as a business activity from the third rent and no longer, as in the previous regime, from the fifth.
HOME BONUS - The 50% renovation bonus for primary residences has been confirmed for 2026, while remaining at 36% for other residences. The earthquake bonus, eco bonus, and furniture bonus have also been extended, with a 50% discount up to €5,000. New resources have been allocated for the Housing Plan, and a contribution has been made to provide housing support for separated or divorced parents. The ceiling for excluding a home from the ISEE (Income Tax Return) has been raised to €91,500, or €200,000 in metropolitan cities.
BOOK BONUS - A book bonus for high school students is now available, with a municipal contribution for families with an ISEE of up to €30,000. For families who choose private schools, a bonus of up to €1,500 per student with an ISEE of up to €30,000 is being introduced. Private schools will also be exempt from IMU (Property Tax). The new Carta Valore Cultura (Culture Value Card) for the purchase of cultural materials and products will be available only to recent high school graduates.
STUDENTS AND RESEARCH - The plan ensures the achievement of the goal of 60,000 new beds for university students living away from home and establishes the Research Planning Fund, with a three-year plan. For the next three years, it will exceed €1.5 billion in total, including funds from FIS, FISA, FIRST, FISR, and FRES, and will be reinforced with over €800 million.
CINEMA CUTS - The budget for the cinema industry is increasing from €700 million annually to €610 million by 2026 and to €500 million by 2027. Additional resources are being provided for severance pay for entertainment workers and exemptions from the minimum number of required contribution days. €5 million annually has been allocated to structurally support non-state museums.
GOLD TO THE ITALIANS - The measure introduced in the Senate sparked an uproar and prompted a lengthy correspondence with the ECB. The provision clarifies that the gold reserves managed and held by the Bank of Italy "belong to the Italian people."
