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Income Tax 2026 Exempts Salary of 5 Thousand, Expands Deductions and Impacts the Economy in Brazil; See How the New IR Table Looks.
Starting from January 1, 2026, the Income Tax will fully exempt workers earning salary of 5 thousand per month. The measure, sanctioned by President Luiz Inácio Lula da Silva in November 2025, alters the IR table and benefits millions of Brazilians.
The government implemented the change throughout Brazil with the aim of alleviating the tax burden, stimulating the economy, and increasing families’ purchasing power.
In addition to full exemption for those earning up to R$ 5 thousand, the Federal Revenue Agency has begun granting partial exemptions for higher salaries. Thus, workers with monthly income of up to R$ 7,350 also receive progressive deductions on the tax, significantly reducing the amount paid to the Treasury.
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Income Tax Exemption Was a Promise and Becomes Economic Priority
The federal government has treated the expansion of the exemption of the Income Tax as a priority since the beginning of the term. The proposal was part of Lula’s campaign promises and gained momentum in Congress throughout 2025.
The project’s rapporteur, Arthur Lira, advocated for the expansion of deductions by stating that taxation on high incomes can generate excess revenue. According to him, this mechanism allows for compensating tax waiver and maintaining the neutrality of the project.
This way, the government sought to balance tax fairness and fiscal responsibility without compromising public accounts.
New Income Tax Table Changes Rules and Expands Annual Savings
Before the change, the Federal Revenue Agency only exempted those earning up to R$ 3,036 per month. Workers with incomes between R$ 3,036 and R$ 3,533 paid a rate of 7.5%, while higher salaries faced progressive deductions of up to 22.5%.
With the new rule, the scenario has changed significantly. Now, those earning salary of 5 thousand no longer pay Income Tax, which represents an estimated annual savings of R$ 4,356.89.
Additionally, the table provides for gradual deductions for intermediate brackets, expanding the reach of the benefit and reducing the tax impact on the middle class.
See How the New Exemption Bracket Works for the IR in 2026
The Federal Revenue Agency began applying deductions according to the taxpayer’s monthly income. Up to R$ 5,000, the exemption is total, with no tax charge.
For those earning up to R$ 5,500, the deduction reaches 75%, with an estimated annual savings of R$ 3,367.68. Salaries of up to R$ 6,000 receive a 50% reduction, which represents an approximate savings of R$ 2,350.79.
In the up to R$ 6,500 bracket, the deduction falls to 25%, ensuring savings of R$ 1,333.90 per year. From R$ 7,350 onwards, the Revenue Agency returns to apply the maximum rate of 27.5%.
Impact of the Exemption on Consumption and the Economy of Brazil
By reducing the Income Tax for workers with salary of 5 thousand, the government increases the disposable income of families. With more money in hand, consumption tends to grow, which strengthens sectors like commerce and services.
Moreover, experts evaluate that the measure can stimulate the formalization of work, as the tax burden becomes lighter for middle incomes. Thus, the policy contributes to dynamizing the economy and increasing the flow of resources in the internal market.
On the other hand, the government bets on compensation through taxation of high incomes to avoid fiscal imbalances.
Who Else Benefits from the New Income Tax Rule
The main advantage falls on salaried workers and public servants who fall within the exemption bracket. For this group, the annual savings can exceed four thousand reais, an amount that directly impacts the family budget.
Additionally, self-employed professionals who report monthly income within the limits can also feel the positive effects of the new table. Thus, the policy reaches different profiles of taxpayers throughout Brazil.
Changes in the IR Reinforce the Debate on Tax Justice
With the new table, the government reignites the debate on fiscal justice and income distribution. By alleviating the burden on lower and middle salaries, the policy aims to reduce inequalities and make the system more progressive.
Meanwhile, the discussion on taxation of large fortunes and high incomes remains at the center of the economic agenda. The government argues that this path allows for financing social policies without penalizing those who earn less.
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