Filenews 12 December 2025 - by Eleftheria Paizanou
The bills for the tax reform may not have been approved yet, but the citizens have already started calculating the benefits they will have from the increase of the tax-free allowance to €22,000 and for the tax deductions that will be granted to them for children, students, interest on a performing mortgage, etc.
This tax relief for households seems to have been locked after the agreement reached on Tuesday by the alliance of DISY, DIKO, DIPA and EDEK with the Minister of Finance. The relevant amendments agreed to be submitted by the parties will be incorporated into the government bills, before the final vote. It is expected that the final text will be as follows:
- Increase of tax-free income to €22,000 and (provided that the income criteria listed below in the report are met) an additional deduction from the taxable income of €1000 will be granted for a child (or student up to 24 or student up to 23), dependent on the taxpayer. The other spouse is entitled to the same tax-free allowance and deduction for a child or student.
- For the second child (second student) the discount will be €1250 and for three children or students or above the discount will be €1500 for each, provided that the income criteria are met.
- The discount that will be granted for the interest on performing mortgages and rents for owner-occupied housing will be €2000 and for green investments in permanent residences and for the purchase of an electric vehicle €1000.
Income criteria
As a condition for the above discounts to be given, the annual family income is set, as follows:
- For the discount for one child, the couple must not have a total income (gross) of more than €90,000. For the discount for two children, the total family income must be up to €100,000, for three or four children it will be €150,000 and for five children or more, the family income can be up to €200,000.
The new scales
Also, the tax scales are differentiated as follows:
- For incomes from €22,001 to €32,000 the tax will be 20%.
- For incomes from €32,001 to €42,000, it will be cut by 25%.
- Annual earnings from €42,001 to €72,000 will be taxed at 30%.
- Income over €72,001 will be subject to 35% taxation.
-Examples of taxation
- This will be implemented in practice as follows: Each of the spouses/cohabitants will submit a separate income tax return. Then, however, the technocrats of the Tax Department will take into account the income of both spouses/cohabitants for the purposes of granting or not granting an additional tax deduction.
For example, discounts will be given as follows:
- Family with one child and with a mortgage: Their total income will be calculated for both taxpayers. An amount of €1000 will then be deducted from each spouse/cohabitant, as well as €2000 from each for the interest on the loan. That is, each taxpayer of the couple will receive a discount of €3,000.
- A family with a child who is studying and has a mortgage. Each of the parents will receive a discount of €3,000 of the total annual income.
- A family with two children who rent a property for their stay. The discount that each taxpayer will receive will be in the order of €4250.
- A family with two children and a student and have a mortgage loan will have tax deductions for each parent will be €5750.
- A family with three children without a loan will receive a discount of €3750 for each parent.
- A family with three children who are studying and the taxpayers have a performing mortgage, each parent will receive a discount of €5,750, in addition to the tax-free allowance of €22,000, provided that the income criteria mentioned above are met.
- In the event that the parents are divorced, then both will receive the tax deductions, regardless of who has custody. Also, in the case of a single parent or widow/widower, beneficiaries will receive double tax deductions, as they will benefit from those granted to a family with two parents. As we were told, in the event that one of the two parents/cohabitants does not submit the income return for the tax year, then neither of them will be eligible for deductions, as it will not be possible to calculate the family income correctly.
- According to a competent source, after deducting the tax-free allowance and tax deductions that each of the taxpayers will receive as well as the other tax exemptions that apply today, the rest of the income will be taxed on the basis of the tax scale to which it falls.
A source from the Ministry of Finance told "F" that due to the digitization of the systems, the calculation of taxation will be easier. In addition, it is expected that guidelines will be given to taxpayers on the new way of completing tax returns.
