The government has approved a deduction of up to 590.89 euros for those earning less than 20,048 euros annually. The measure aims to ensure that the Minimum Interprofessional Wage (SMI) of 2026 is not taxed and extends tax relief to thousands of low-income workers.
The Council of Ministers has greenlit a reduction in income tax that will benefit workers with earnings below 20,048 euros gross annually. The measure, structured through a progressive deduction of up to 590.89 euros, guarantees that the Minimum Interprofessional Wage (SMI) of 2026, set at 17,094 euros, will continue to be exempt from this tax. Additionally, it extends tax relief to those earning less than 20,000 euros, although with a lower amount as their income increases.
According to the Ministry of Finance, the deduction will be applied to gross employment income and will gradually decrease until it disappears when the salary reaches the established limit. The additional condition is that non-employment income does not exceed 6,500 euros annually, which limits access for those with significant extra income.
Who benefits and how much will they save
The main group benefiting are workers earning the SMI of 2026. For them, the maximum deduction of 590.89 euros completely offsets the tax, preventing the approved salary increase for this year from being diminished by a higher tax burden. In practical terms, a worker with a salary of 17,000 euros will stop paying the approximately 356 euros they paid the previous year.
For those with incomes above the SMI but below 20,000 euros, the reduction will be smaller. The deduction is calculated progressively: as the salary approaches the limit of 20,048 euros, the benefit decreases until it is nullified. For example, a worker earning 19,000 euros annually could save around 200 euros, according to estimates from the Treasury.
"The measure maintains the principle of fiscal progressivity, so that the benefit is greater for those with lower incomes," sources from the Ministry state.
How the deduction is applied in practice
The deduction does not translate into direct income but rather reduces the amount of income tax that the taxpayer must pay. In most cases, the savings will materialise when filing the income tax return, although it will depend on the withholdings that the company has applied throughout the year. For this reason, some workers will continue to see withholdings in their monthly paychecks, and it will be during the income tax campaign that the final result is regularised.
The Ministry of Finance recommends reviewing the withholdings to avoid surprises. Workers who know they will benefit from the deduction can request their company to lower the withholdings, although this is not mandatory. In any case, the final balance will be settled in next year’s tax return.
The goal: to protect the purchasing power of the lowest incomes
With this reduction, the Executive aims to adapt income tax to the increase in the SMI and prevent part of the salary increase from ending up in the hands of the Treasury. The initiative adds to other fiscal measures aimed at strengthening the purchasing power of modest incomes, such as the increase in the exempt minimum or deductions for large families.
The measure represents relief for low-wage workers, who in a context of persistent inflation see their purchasing power diminished. For readers interested in the topic, it is worth noting that the deduction will be applied for the first time in the 2026 income tax return, which will be filed in 2027. Until then, workers can calculate their potential savings using the tables that the Tax Agency will publish in the coming months.
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