The 2026 Budget Law, which came into effect on 1st January 2026, has been published in Official Gazette No. 301. It includes the

The 2026 Budget Law (Law No. 199/2025) introduces significant changes not only in the fiscal sector but also in the fields of employment and social security.

Among the key changes, the reduction of the IRPEF rate for the second income bracket, now set at 33%, and the increase in the deductibility limit for contributions to supplementary pension schemes to €5,300 are notable.

Additionally, measures have been implemented to encourage the employment of working mothers, as well as to strengthen parental leave and leave for children's illness.

On the social security front, the extension of the APE Sociale (Social Pension Advance) is confirmed, alongside the possibility of continuing to work after meeting the requirements for early retirement. The law also stipulates that, starting in 2027, the adjustment to life expectancy will resume for access to old-age or early retirement pensions.

Let us now review the key aspects of the reform and the main changes introduced by the 2026 Budget Law.

Revision of the IRPEF      

The modification of the IRPEF rate applied to the second income bracket has been confirmed. Starting from the 2026 tax year, the IRPEF rates will be as follows:

• 23% up to €28,000
• 33% from €28,000 to €50,000
• 43% above €50,000

Paragraph 4 introduces a reduction in the tax deduction for taxpayers with income exceeding €200,000, lowering the deduction from the gross tax by €440.

In particular, taxpayers with income above this threshold will lose part of the deductions for certain expenses, such as:

• Deductible expenses at 19% (excluding healthcare costs)
• Donations to political parties (up to €30,000)
• Insurance premiums for natural disaster events

Exemption for Hiring Mothers with More than 3 Children

The exemption introduced by paragraphs 210 to 213 provides a complete exemption from social security contributions for private employers who, from 1st January 2026, hire women who are mothers of at least three minor children (under the age of 18) and who have been unemployed with no regular income for at least six months.

The exemption, which can reach up to €8,000 per year, is prorated on a monthly basis and can last up to 24 months, depending on the type of contract (12 months for fixed-term contracts, 18 months for contracts converted from fixed-term to permanent, and 24 months for permanent contracts). This measure aims to support working mothers and promote the integration of individuals who have been excluded from the labour market.

In a broader context of family support, paragraphs 214 to 218 encourage the transformation of full-time contracts to part-time (both horizontal and vertical), particularly for workers with at least three children living with them, up to the tenth year of age of the youngest child, or with no age limit in the case of children with disabilities.

In this case, the contribution exemption covers the employer's portion of the contribution, up to a maximum of €3,000 per year, prorated monthly for a maximum period of 24 months.

Electronic Meal Vouchers

Paragraph 14 modifies the regulations concerning meal vouchers, stipulating that electronic meal vouchers, up to a value of €10, will no longer be subject to taxation (up from the previous €8).

This measure aims to improve employee well-being and simplify the management of meal allowances by increasing the exemption threshold.

Extension of Parental Leave

Parents of children between the ages of 12 and 14 can now benefit from extended parental leave, and the leave for a child's illness (for minors between 3 and 14 years old) has been increased to 10 working days per year. This change also applies to adoptive or foster parents, extending the possibility of leave up to the child's fourteenth birthday.

Furthermore, the leave for a child's illness (for children between 3 and 14 years old) has been increased to 10 working days per year for each parent.

Tax Relief on Performance Bonuses

The innovations introduced by paragraphs 8 and 9 concern the substitute tax applied to performance bonuses and forms of profit-sharing. For the 2026-2027 biennium, the rate for these bonuses has been reduced to 1%, with a gross taxable limit of €5,000.

Substitute Tax on Salary Increases

Paragraph 7 establishes that salary increases arising from new collective labour agreements signed between 2024 and 2026 will be subject to a substitute tax of 5%, applied to income from dependent employment, provided the employee's total income in 2025 does not exceed €33,000.

Hiring Incentives Effective from 2026

Among the most significant measures, contribution incentives have been introduced for permanent hires and for the transformation of fixed-term contracts into permanent contracts.

Specifically, paragraphs 153 to 155 offer a partial exemption from social security contributions for employers who hire permanently or convert fixed-term contracts into permanent ones in 2026.

The exemption applies for a maximum of 24 months, but excludes INAIL (National Institute for Insurance against Accidents at Work) premiums. The aim of this measure is to promote stable youth employment, encourage equal opportunities for disadvantaged female workers, and incentivise development in the South of Italy through the Special Economic Zone (ZES).

Tax Regime for Public Sector Employees

Paragraph 237 introduces a substitute tax for public sector employees (excluding managerial staff and armed forces personnel) with an income not exceeding €50,000. For these employees, fixed and continuous allowances will be subject to a reduced tax rate of 15%, up to a limit of €800.

Dividends for Employees

Paragraph 13 extends a measure already introduced for 2025, applicable to dividends derived from shares allocated to employees in lieu of performance bonuses. For these dividends, only 50% will be included in taxable income, except for the portion that exceeds €1,500, which will be fully taxed.

Income Supplements

Mothers, whether employed or self-employed, with two or more children and an annual work income not exceeding €40,000, may receive an income supplement of €60 per month for each month worked, up to the tenth year of the youngest child’s age.

For working mothers on maternity or parental leave, a new measure has been introduced allowing the extension of the employment contract for an additional period of support for the employee, up to the child's first year of age.

Social Welfare Measures

Social welfare measures have been expanded through paragraphs 164–174 of the 2026 Budget Law, aimed at providing support to workers and businesses in difficulty.

The main new provisions include:

• Allowance for workers in the fishing industry with €30 million allocated.
• CIGS (Extraordinary Wage Supplementation) for areas of industrial crisis with €100 million and exemption from the additional contribution for businesses in crisis.
• Extraordinary benefits for businesses ceasing operations for up to 12 months, with additional support in case of business transfer.
• Support for ex-Ilva employees.
• Allowance for call centre workers refocused with funding for up to 12 months.
• CIGS for national strategic businesses.
• Modifications to NASpI (New Social Insurance for Employment), which will now be paid in two instalments to encourage self-employment.
• Discontinuity allowance for entertainment workers, with an increased income cap of €35,000 and reduced contribution requirements.

Tax News pubblicata il 07/01/2026 da Sergio Fedele