How is IRS (Portuguese income tax) calculated?

What is IRS?

IRS (Imposto sobre o Rendimento das Pessoas Singulares) is Portugal's annual personal income tax. It is not charged on your gross salary but on your taxable income: what is left after the specific deductions and other allowances¹. It is this figure that the brackets apply to.

This article (and our IRS calculator) explains how the coleta (the tax produced by the brackets) is calculated. The deductions to tax, the minimum-existence floor and the refund are covered further down.

What is taxable income?

Taxable income (rendimento coletável) is the base for IRS. For employees, you start from gross income and remove the specific deductions (mainly social-security contributions) and other allowances set in law. The result is lower than your gross salary.

It is this figure (not your gross salary) that you enter in the IRS calculator. You will find it on your IRS assessment note.

How is IRS calculated?

IRS is progressive: income is split into slices and each slice pays its own rate. The law applies two rates to each bracket¹:

Tax = previous bracket's limit × average rate + excess × marginal rate

• The marginal rate (normal rate) is that of the bracket the income falls into, the rate on the last euro earned.
• The average rate is the percentage already paid, at the previous bracket's limit, across all the earlier slices.

So the rate you actually pay (the average rate) is always lower than the marginal rate. You can see both, and the step-by-step calculation, in the IRS calculator.

What are the Portuguese income tax brackets in 2026?

In 2026 there are still nine brackets on the mainland, updated by the State Budget³. For each bracket, the normal rate (marginal) and the average rate¹:

What is the difference between the average and marginal rate?

This is the most common confusion. The marginal rate is that of the highest bracket your income reaches; the average rate is total tax divided by total income. Because the first slices pay low rates, the average always sits below the marginal. When someone says "I'm in the 24% bracket", they mean the marginal rate, but their effective bill is smaller.

Does moving up a bracket reduce my pay?

No. It is a myth. IRS is progressive slice by slice: when income passes a bracket's limit, only the part above that limit pays the higher rate. The rest is still taxed at the lower brackets' rates. Earning more never lowers your net income; it only nudges up your average rate.

Worked example

Take a taxable income of €20,000, filing individually. It falls in the 4th bracket (€17,838 to €23,089):

• Part at the average rate: €17,838 × 15.823% = €2,822.51.
• Part at the marginal rate: (€20,000 − €17,838) × 24.1% = €521.04.
• Tax (coleta) = 2,822.51 + 521.04 = €3,343.55.

The effective average rate is 16.7%, well below the 24.1% marginal rate. For a couple with €40,000 filing jointly, you split it in two (€20,000), pay €3,343.55 on each half, and the total is €6,687.10. Try your own case in the IRS calculator.

Is it worth filing IRS jointly?

Married or de-facto couples may choose joint taxation. In that case the family quotient applies²: the couple's taxable income is divided by two, the tax is computed on that half, and the result is multiplied by two.

Because the brackets are progressive, sharing income usually lowers the average rate, especially when one partner earns much more than the other. When incomes are similar, the difference is small. Simulate both scenarios before deciding.

What about deductions, the minimum-existence floor and the refund?

The calculator computes the coleta (the bracket tax). A few steps remain before the final figure:

• Deductions to tax: health, education, housing, invoice VAT and other benefits that are subtracted from the tax.
• Minimum-existence floor: ensures lower incomes do not pay IRS below a threshold.
• Withholding tax: what was deducted month by month; the refund (or payment) is the difference between the withholding and the final tax.
• Solidarity surcharge and the regional tables of the Azores and Madeira, which are not computed here.

Once you understand IRS, you may be interested in the tax on what you made selling investments. See what capital gains are or the annual property tax in how IMI is calculated.