Senate Raises Income Tax Exemption Bracket

Income Tax This has been a central theme in Brazilian economic and political discussions, especially after the recent Senate approval of a bill that raises the exemption threshold to R$1,440,500 per month.

In this article, we will explore the proposed changes, including the new discounts for incomes between R$ 5,000 and R$ 7,350, the maintenance of the current progressive tax table, and the introduction of a tax rate on profits and dividends.

Analyzing the implications of these changes for taxpayers and government revenue will be crucial to understanding the impact of the new rules.

Context of the Senate approval on November 5, 2025

The Senate's approval of the bill in November 5, 2025 It marked a significant change in the Brazilian tax system.

This project, which exempts from Income Tax those who earn up to R$ 5 thousand monthly, it was an important step towards tax justice.

Since 2015The country had never seen a reform of such magnitude, adjusting the tax burden to ease the burden on the middle class while simultaneously introducing a more balanced system.

With the approval, those who earn between R$ 5 thousand It is R$ 7.350 They will receive income tax discounts, benefiting a significant portion of the population.

Furthermore, to compensate for the drop in revenue, the project introduces a progressive tax rate of 10% on profits and dividends exceeding R$ 600 thousand annually, seeking to increase contributions from the wealthiest.

The project, as detailed by Federal SenateThis is seen as a step towards a fairer tax system, possibly boosting the economy by increasing the purchasing power of Brazilians.

This move not only reflects the necessary updating of tax brackets, but also places Brazil in a position of greater fiscal equity.

Raising the income tax exemption threshold to R$ 5 thousand per month

The recent Senate approval of raising the exemption threshold for Income Tax to R$ 5,000 monthly This will bring significant changes for Brazilian taxpayers.

From 2026Those earning up to that amount will be exempt, which represents considerable financial relief for many.

This measure aims to benefit a significant portion of the population that feels the impact of taxes on their personal finances.

At the same time, those with income between R$ 5.000 and R$ 7.350 They will also see a reduction in their tax deductions.

To offset the loss of revenue, there will be a tax rate of 10% applied to profits and dividends above R$ 600 thousand annually, shifting the burden towards higher incomes.

This reflects an attempt at fiscal justice.

Among those who directly benefit are:

• Taxpayer with a salary of R$ 4,800
• Self-employed taxpayer who receives an average of R$ 5,000 per month.
• Small business owner whose withdrawal does not exceed R$ 5,000

As mentioned by various sources, as explained by Senate NewsThe implementation of these new rules appears to be a political strategy to mitigate inequalities, encouraging economic growth and consumption.

This has an impact not only on those who earn less, but also puts pressure on a broader tax reform in the future.

Income tax discounts for incomes between R$ 5,000 and R$ 7,350

Taxpayers who receive monthly incomes between R$ 5,000 and R$ 7,350 will now be eligible for attractive income tax discounts.

Although the current progressive tax table will not be altered, the new law approved by the Senate provides tax relief for this income bracket.

The idea is that such discounts will soften the tax burden, making it fairer for those in this income bracket.

The proposed policy aims to reduce inequalities in the tax system, providing greater fiscal justice.

To illustrate, consider how discounts might be applied:

To understand all the details of this measure and its impacts, you can consult the official source by clicking on details about income tax exemption.

This change represents a significant step forward. in the pursuit of a more equitable tax system.

Effective date of the new rules and impact on the 2027 tax return.

The new income tax rules, approved by the Senate, come into effect. starting in January 2026.

This means that the 2027 tax return, based on the 2026 calendar year, will be significantly impacted by the changes.

Increasing the exemption threshold to R$ 5 thousand monthly This means that many taxpayers will be exempt from payment.

For those earning between R$ 5,000 and R$ 7,350, discounts will be applied, but without altering the existing progressive tax table, bringing relief to the wallets of many Brazilians.

To compensate for the loss of revenue, a new progressive tax rate of 10% will apply to profits and dividends above R$ 600 thousand annuallyas detailed in impact of withholding tax on high incomes.

• January 2026: Start of the new rules' validity.
• 2027: The statement reflects changes in income tax.
• R$ 5 thousand monthly: New exemption bracket
• R$ 600 thousand annually: Profits above that amount will be subject to the new tax rate.

The changes aim to make the tax system fairer, but they also require taxpayers to pay attention in order to adapt their finances to the new tax landscape.

Compensation for revenue loss due to tax rate on profits and dividends.

The recent Senate approval of the bill establishes a new tax framework for profits and dividends, impacting those who receive higher amounts.

According to the proposal, a 10% rate It will be progressively levied on profits and dividends that exceed R$ 600 thousand annually.

This measure aims to offset the loss of revenue resulting from the new income tax exemptions.

The aim is to ensure a balance in public finances by redistributing the tax burden.

Considering that dividends were previously not taxable, the introduction of this tax represents a significant change for investors and entities that reach this income bracket.

When applying tax rates on the amounts that exceed the defined quantityIt is expected that this will not only compensate for the income tax exemption, but also stimulate fiscal equity.

The adjustment is necessary to maintain the sustainability of the budget, without unduly burdening middle- and low-income taxpayers.

This is detailed by various sources such as Money Times which analyze significant changes in the tax treatment of high incomes, reaffirming the importance of economic responsibility.

This measure, therefore, incorporates a fairer perspective in the distribution of the tax burden, affecting those who, in fact, have a greater ability to pay.

In short, the changes to Income Tax presented by the Senate seek to balance the tax burden, providing relief to many taxpayers while maintaining the necessary revenue.