The following IRPF Calculator, which we put at your service, shows the amount of personal income tax to be paid depending on the gross salary of the taxpayer, the autonomous community where they work, and their age. It also allows you to calculate the Social Security contributions the worker and the company have to pay.
IRPF Calculator
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The 2020 IRPF brackets are crucial to know what will be your IRPF withholding in your paycheck and how much tax you will pay in next year’s Income Tax Return. These brackets are the ones that turn income into a progressive tax where the more you earn the more you have to pay, and these are usually relatively stable over time.
Except in cases of tax reforms, personal income tax rates are usually inherited from one year to the next. This is what has happened with the 2020 IRPF brackets pending the formation of a new government.
IRPF Brackets in 2020
What are the personal income tax rates in 2020?
These would be the same as in 2019 unless there is a last-minute change or modification at the beginning of the fiscal year, which will depend on the agreements of the government.
The agreement reached between PSOE and Unidas Podemos includes «a fair and progressive tax reform» and changes in the structure of the Personal Income Tax tables by adding two new brackets. However, it does not seem that this change is imminent.
In the absence of a Government, the Tax Agency has already advanced the algorithm for the calculation of withholdings in the 2020 payroll without changes in the income brackets. So this algorithm does not include any changes other than the update of the year from 2019 to 2020.
Thus, these are the income tax rates approved for 2020:
What can change in these IRPF brackets for 2020? The Government agreement between PSOE and Podemos speaks directly of a tax increase for the higher classes in 2020.
This 2020 tax reform establishes the creation of two new IRPF brackets for those earning more than 130,000 euros and 300,000 euros respectively. The increase in the personal income tax burden on these incomes would be two and four percentage points respectively.
Specifically, those earning more than 130,000 euros would be taxed at a maximum rate of 47%, and those earning more than 300,000 euros at 49%. This is stated in the program of its government pact which, however, does not specify when the measure would come into force, although it is rumored that it would not be immediately. This would be the new composition of 2020 IRPF brackets if the tax change is finally approved in these terms.
Does this mean that the Treasury would keep almost half of your salary? No, nothing could be further from the truth. The key is in how the income brackets are applied and what is known as the marginal rate.
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How do the IRPF brackets work?
Income is a progressive tax that increases the tax burden as revenues increase. To make it easier to understand, a person with a salary of 30,000 euros will not have to pay 9,000 euros in taxes at a rate of 30%. Nor will one earning 65,000 euros pay 29,250 euros (a 45% rate).
The percentages in the table are applied progressively, first one and then another. Thus, the tax bill is greatly reduced. This is what you pay in each bracket.
Basically, a person earning 30,000 euros will pay 7,225.50 euros in income tax, almost 2,000 euros less than if the IRPF was not progressive. In the second case, the tax bill is reduced even more. From 29,250 euros to 20,151.50 euros.
Moreover, these brackets are not even applied in full to your salary. In this income there are also some minimum exemptions, which this year are 15,947 euros, and a series of deductions depending on your personal and family situation. The basic deduction, for a single person under 65 years of age, is 5,550 euros. Thus, that person who earns 30,000 euros is as if they had only earned 24,450 euros.
These two variables are taken into account when calculating the IRPF withholdings in the payroll. For this reason, even if you earn 22,000 euros, it is easy to enter the minimum exemption and reductions. Your marginal rate, the maximum that applies to you, is not 30% and the average rate is also far below 24%.
This will be reflected in the IRPF withholding that the company applies to you and that is recalculated at the beginning of the year or in case your work or personal situation changes. If you are a parent, you must inform the company so that they can recalculate the withholding and they must also do so if your salary has been increased. Of course, now that you know how the IRPF works, you will also understand that if you earn a salary you can receive less because of the withholdings. It is just one of the many tax myths that circulate around.
Applied to the 2020 tax reform proposed by PSOE and Unidas Podemos, this means that incomes between 60,000.01 euros and 100,000 euros would pay 47%. And earnings between 130,000.01 euros and 300,000 euros, 49%. For practical purposes, this would add two new brackets to the IRPF and would alternate the current maximum rate. This is how the table of IRPF brackets would look like, for a person with a taxable income of 400,000 euros once the minimums have been applied.
As in the previous case, a person with a taxable income of 400,000 euros will not pay 53% in taxes, but only in the highest tax bracket.
Fuente: Business Insider España
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