The 2025 Budget introduced significant changes to the tax deduction system, imposing new limits for taxpayers with incomes above 75,000 euros. According to estimates from the Parliamentary Budget Office (UPB), this measure will guarantee greater revenue for the State, which will gradually grow to reach around 900 million euros per year when fully operational.
However, the weight of the new rules will not be the same for everyone: while some income groups will be more affected, others may find greater protection thanks to mechanisms such as the family coefficient.
In a context in which deductible expenses range from construction to school and healthcare costs, the choices to be made will become crucial to avoid exceeding the new limits imposed.
Who will be the most penalized taxpayers? Which expenses will be most difficult to deduct? And how will the family factor influence it?
Advertisement – Advertising
The new mechanism of caps on deductions
The 2025 Budget introduced maximum limits on deductible expenses, diversified based on income and the number of dependent children. For taxpayers with incomes between 75,001 and 100,000 euros, the limit is set at 14,000 euros, while for those with incomes above 100,000 euros it drops to 8,000 euros.
A key element of this reform is the family coefficientwhich allows you to modulate the limits based on the composition of the family unit, following these rules:
- 0.50: no dependent children.
- 0.70: a dependent child.
- 0.85: two dependent children.
- 1.00: three or more dependent children, or at least one child with a disability.
Not all expenses are included in the new limit: the health expenses remain excluded, but other traditionally deductible items, such as expenses for building renovations, mortgages, education and insurance, will be subject to the limits. This requires taxpayers to carefully select which expenses to include so as not to exceed the limit.
The new system is designed to rationalize tax breaks, but involves sacrifices for many families, especially those with high incomes and less advantageous family compositions.
Advertisement – Advertising
Who will be penalized the most?
The main ones penalized by the reform will be taxpayers with high incomes and smaller family compositions. In particular, i singles with incomes above 100,000 euros they will be among the most affected, given the maximum deductibility limit set at 8,000 euros, combined with the family coefficient of 0.50.
Even couples without children, despite having a slightly higher coefficient, will suffer a significant impact.
Families with more dependent children they are relatively protected thanks to the increase in the family coefficient, which can reach up to 1.00. For example, a family with three dependent children and an income of 110,000 euros will be able to deduct a greater sum than a childless couple with the same income.
However, the overall cap may still be insufficient to cover significant expenses such as building renovations or mortgages, which often constitute an important part of the required deductions. The cumulative effect of the new system risks penalizing those taxpayers who make multiple types of eligible expenses.
Advertisement – Advertising
The most penalized expenses: construction and mortgages
Among the expenditure items most affected by the reform we find those linked tobuilding and ai mortgages. Building renovations, in particular, often involve high costs that easily exceed the new limits. This is especially evident in the income range between 75,001 and 100,000 euros, where the ceiling of 14,000 euros may be insufficient to cover both construction costs and other deductible expenses, such as those for education or insurance.
For incomes over 100,000 euros, the limit drops further to 8,000 euros, accentuating the problem for those who incur significant expenses in multiple areas. For example, a taxpayer who faces costs for a renovation (7,000 euros), an ecobonus (2,500 euros) and other deductible expenses could exceed the limit even in the absence of other significant items.
THE’cumulation effect of eligible expenses is one of the most critical aspects. Taxpayers who make different types of expenses may find themselves forced to choose which ones to deduct and which to exclude, thus losing part of the tax benefits available in the past.
Advertisement – Advertising
Practical examples: how deductions change
To better understand the impact of the new legislation, we analyze some practical examples, carried out by Il Sole 24 Ore, based on different family situations and income levels.
1. Single with income of 82,000 euros
A single person without children and with an income of 82,000 euros will have a maximum limit of deductible expenses equal to 7,000 euros (14,000 euros basic limit, multiplied by the coefficient 0.50). Suppose you incur the following expenses:
- Building renovations: 5,000 euros
- Ecobonus: 2,500 euros
- Furnishing costs: 1,000 euros
- Insurance costs: 1,000 euros
The total expenses are 9,500 euros, but only 7,000 euros will be deductible. As a result, the taxpayer will lose the possibility of deducting 2,500 euros.
2. Family with one child and income of 110,000 euros
A couple with one child and a total income of 110,000 euros will have a maximum deductible expense limit of 5,600 euros (8,000 euros basic limit, multiplied by the coefficient 0.70). Suppose this family incurs the following expenses:
- Building renovations: 3,500 euros
- Ecobonus: 1,500 euros
- School expenses: 1,500 euros
The total expenses are 6,500 euros, which exceeds the ceiling of 5,600 euros. Consequently, 900 euros will not be deductible.
3. Family with three children and income of 95,000 euros
A family with three children and an income of 95,000 euros will have a maximum limit of deductible expenses equal to 14,000 euros (14,000 euros basic limit, multiplied by the coefficient 1.00). Suppose you incur the following expenses:
- Building renovations: 8,000 euros
- Ecobonus: 4,000 euros
- School expenses: 2,000 euros
The total expenses are 14,000 euros, perfectly within the maximum limit. In this case, the family is able to fully benefit from the available deductions.
4. Single with income of 105,000 euros
A single person with an income of 105,000 euros will have a maximum deductible expense limit of 4,000 euros (8,000 euros basic limit, multiplied by the coefficient 0.50). Suppose you incur the following expenses:
- Building renovations: 6,000 euros
- Ecobonus: 2,000 euros
- Insurance costs: 1,000 euros
The total expenses are 9,000 euros, which exceeds the maximum limit by 5,000 euros. Therefore, the taxpayer will not be able to deduct a significant portion of the expenses incurred.
These examples demonstrate how the new system can impact differently based on income, family composition and type of expenses.
Advertisement – Advertising
Critical issues of the new system: penalties and forced choices
One of the main critical issues of the new system concerns thecumulative effect of eligible expenses. Taxpayers who previously benefited from deductions on a wide range of expenses will now be forced to choose which ones to include to meet the new caps. This presents a particularly complex challenge for those who incur large expenses in multiple areas, such as building renovations, mortgages and education.
For example, a taxpayer who has already reached the maximum limit on home improvement expenses may not be able to deduct other necessary expenses, such as school expenses or the purchase of furniture.
Furthermore, the new limits do not take into account the economic impact of inflation, which could make renovation and mortgage costs even more burdensome in the years to come.
