The 2025 Budget: Winners and Losers of a Chaotic Financial Landscape

The much-anticipated 2025 budget has finally been published in the Official Journal on Saturday, February 15. Following a lengthy legislative process, the finance law is now enacted. As the dust settles, various groups have emerged from this budget with either benefits or losses. Here’s a closer look at the implications of the new fiscal measures for 2025.

Key Highlights of the Budget

The most significant change is the indexation of the income tax brackets on the annual inflation rate for the year 2024. This move essentially benefits almost all households subject to income tax. Without this adjustment, taxpayers would have faced a real threat of losing out in the absence of a voted budget. The indexation is set at 1.8%, a decrease from the initially proposed 2%, leading to a smaller tax relief than many had hoped for.

Winners of the 2025 Budget

Taxpayers with Indexed Tax Brackets

A majority of taxable households will benefit from the indexation of the income tax brackets. This adjustment means that taxpayers avoid what could have been a significant financial detriment if the brackets had remained frozen.

Here are examples of specific tax scenarios under the new budget:

• Manon, a single individual earning €1,400 monthly, is set to save €49 compared to a frozen rate.
• Sabrina, earning €2,000 monthly, will save €774 under the indexed bracket.
• Johan, with a monthly income of €2,963, will experience a tax reduction of €121.
• Couples with children, such as Amina and Gabriel, will see their tax burden decrease by €123 with their combined income of €2,700 each.

Households Near the Tax Threshold

The new provisions will also secure the financial status of approximately 619,000 taxpayers who were at risk of becoming taxable due to the potential freeze. The adoption of the budget will spare these middle-income earners from unnecessary tax liabilities.

Who are the Losers?

Despite the benefits for many, the budget has not been without its drawbacks, particularly for certain demographics.

High-Income Earners

The introduction of a differential contribution on high incomes will heavily impact wealthy individuals. A new minimum tax rate of 20% on income will apply to single taxpayers with earnings above €250,000 and couples exceeding €500,000. This minimum tax will take effect in 2025, calculated on advances after the current financial year.

Real Estate Investors

Real estate investors are also facing negative consequences from the 2025 budget. The complete termination of the Pinel tax incentive program for investment properties, effective January 1, 2025, is a significant blow, as only investments made before this date will qualify for tax reductions. Additionally, new regulations will impose tax liabilities on depreciated values of furnished rental properties, undermining previous tax advantages.

Wage Earners with Increased Incomes

It’s essential to note that while some households will enjoy benefits from the indexed tax brackets, those who experience a substantial salary increase may find their tax obligations increase. For instance, if an individual’s monthly salary increased by 3% over the previous year, the corresponding tax for 2025 would reflect this rise, despite the indexation adjustment.

Example Cases

• Sabrina, whose 2024 income increased to €2,060 monthly, will face an additional €55 in tax liability for 2025.
• Amina and Gabriel, earning approximately €2,790 each per month by the end of 2024, will see their tax obligations rise by €157.

Conclusion

The enacted 2025 budget arrives after extensive debate and legislative maneuvering. While most taxpayers will experience relief from tax burdens due to the indexation of income tax brackets, significant challenges lie ahead for high-income earners and real estate investors. As the government continues navigating these fiscal reforms, the impacts of these changes will undoubtedly shape the financial landscape for many households across the nation.

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