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Understand How the New Exemption Range Will Impact Workers and What Changes in the Paycheck from January 2026
The Bill 1,087/2025, presented on March 18, 2025, proposes total exemption from Income Tax for those earning up to R$ 5,000 per month.
The proposal advanced rapidly and was approved by the Chamber of Deputies in October 2025, now moving to the Federal Senate, where the vote is expected to take place this year.
If the text is approved without changes, President Luiz Inácio Lula da Silva will sign the measure by the end of 2025.
Thus, the new exemption will come into effect in January 2026, bringing immediate fiscal relief and positively impacting the paychecks of millions of Brazilians.
How the New Charging Model Will Be
The project determines that those earning up to R$ 5,000 per month will be completely exempt from income tax, which guarantees automatic and immediate exemption.
This change will provide annual savings of up to R$ 4,356.89, including the 13th salary.
Those earning between R$ 5,000.01 and R$ 7,350 will have gradual tax reduction, according to the formula R$ 978.62 – (0.133145 × salary after INSS).
Above R$ 7,350, the full amount will be charged, according to the traditional tax table.
In addition, incomes above R$ 50,000 will pay a minimum tax rate of 10% on profits and dividends, which increases progressivity and corrects inequalities accumulated over the years.
With this update, the government seeks to reduce the tax lag and ensure greater fiscal balance for all taxpayers.
What Changes in the Paycheck
Starting in 2026, workers will need to review their paychecks monthly, ensuring that the income tax deduction is correct.
According to accountant Carla Tasso, director of the Union of Accounting Service Companies of Espírito Santo (Sescon-ES), the calculation considers all earnings, such as base salary, overtime, commissions, and night differentials.
Because of this, any salary variation can alter the tax bracket, changing the final amount of tax withheld.
To avoid errors, Carla recommends monthly monitoring and increased attention.
With the new rule, the saved amount can be used for essential expenses, such as education, food, and health, strengthening the family budget.
According to Sescon-ES, more than 200,000 workers in Espírito Santo will benefit directly from the measure, which will stimulate local consumption and the regional economy.
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Understand the Applied Calculations
The new calculation model was developed to be simple and accessible, which facilitates verification by taxpayers.
First, the INSS deduction is applied to the gross salary.
Then, the system automatically identifies the income bracket and calculates the corresponding reduction.
Up to R$ 5,000, the worker will have total exemption.
Between R$ 5,000.01 and R$ 7,350, the gradual reduction will be effective, according to the established formula.
Above this value, the collection follows the IR table in full.
These same rules will apply to the 13th salary, ensuring uniformity and predictability in deductions.
The Ministry of Finance states that the change simplifies the system, increases transparency, and modernizes the tax structure, which has not undergone a comprehensive update since 2015.
Thus, taxpayers will have more clarity and security when reviewing their deductions.
Timeline of Processing and Next Steps
In March 2025, the federal government presented the project to the National Congress.
Later, in July of the same year, the Special Committee of the Chamber approved the text, expanding the exemption range to up to R$ 7,350.
The following month, in August 2025, the deputies approved the urgency regime, which accelerated the voting process.
By October 2025, the Chamber of Deputies plenary approved the text unanimously, and the project moved to the Federal Senate.
If the Senate maintains the current version, the government will send the proposal for presidential sanction still in 2025.
According to the Ministry of Finance, the new rules will take effect in January 2026, directly reflecting in the net salary and increasing the purchasing power of workers.
Impact on the Wallet and Increased Attention
The new exemption range will bring reduction in the tax burden, stimulus to internal consumption, and greater purchasing power.
In addition, the benefit will increase disposable income and improve the financial balance of families.
Therefore, it is essential to monthly monitor the deductions, since any additional hours or overtime can alter the tax bracket.
Director Carla Tasso (Sescon-ES) explains that, in addition, regular monitoring of values is essential, as it prevents errors, corrects any inconsistencies, and therefore ensures the full benefit of the new fiscal policy.
According to her, “this extra amount, in turn, makes a big difference in families’ budgets, as it helps with basic expenses, contributes to balancing household accounts, and reinforces financial stability.”
Thus, Bill 1,087/2025 marks progress in tax modernization, correcting distortions and making the system fairer and more transparent.
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