IRS 2025 Simulator: How to Calculate Tax on 2025 Income
Introduction
IRS - Personal Income Tax - is the main direct tax in Portugal. Every year, employees who earned Category A income must submit their annual declaration, typically between March and June of the following year.
In 2026, taxpayers will declare income earned during 2025. To help citizens estimate their IRS payment or refund before the official declaration, the IRS 2025 Simulator was developed - an interactive digital tool that allows this estimate to be made simply, quickly and clearly.
This article describes the calculation methodology used, the applicable brackets and deductions for 2025 income, and explains how to use the simulator most effectively.
What is the IRS 2025 Simulator
The IRS 2025 Simulator is an interactive web application developed for employees (Category A) residing in mainland Portugal. The simulator was built based on the IRS brackets approved for 2025 income, as per the 2025 State Budget.
Main Features
- Automatic real-time IRS calculation
- Support for different tax situations: single, married with 1 holder and married with 2 holders
- Consideration of dependents and respective deductions
- Category A specific deduction (Social Security)
- Tax deductions for health, education, housing and general family expenses
- Comparison between net tax and withholding tax
- Display of effective IRS rate
- Line-by-line detail of the entire calculation process
Who Is It For
This simulator is intended for employees who want to anticipate their IRS declaration result. It is especially useful for those who want to understand whether they will have IRS to pay or receive, adjust withholding tax throughout the year, or simply understand how the tax calculation works.
The simulator does not replace the official declaration to be submitted on the Finance portal (irs.portaldasfinancas.gov.pt) nor the advice of a Certified Accountant.
Calculation Methodology
The IRS calculation for Category A income follows a logical sequence of steps, as established in the IRS Code (CIRS). The simulator faithfully reproduces this sequence.
Step 1 - Category A Specific Deduction
The first step is to determine taxable income by subtracting the specific deduction from gross income. For Category A (employment income), this deduction is the greater of:
- The value of mandatory contributions to social protection schemes (Social Security), calculated at 11% of gross salary
- The legal minimum of €4,104 per year
Formula: Taxable Income = Gross Income − max(Gross Income × 11%; €4,104)
Step 2 - Division by Marital Coefficient
For married taxpayers with two income holders, the combined taxable income is divided by 2 before applying the brackets. This division ensures more equitable treatment for couples where both spouses work.
For single taxpayers and married with one holder, the coefficient is 1. After calculating gross tax, the value is multiplied again by the coefficient.
Step 3 - Applying IRS Brackets
IRS brackets work progressively: each bracket taxes only the portion of income within that range. To simplify the calculation, the marginal rate is applied to total income, minus a deductible portion.
IRS Brackets - 2025 Income
| Taxable Income (€) | Marginal Rate | Deductible Portion |
|---|---|---|
| Up to €8,059 | 13.00% | €0.00 |
| €8,059 to €12,160 | 16.50% | €282.07 |
| €12,160 to €17,233 | 22.00% | €950.88 |
| €17,233 to €22,407 | 25.00% | €1,467.60 |
| €22,407 to €28,141 | 32.00% | €3,036.09 |
| €28,141 to €41,629 | 35.25% | €3,950.58 |
| €41,629 to €44,987 | 43.50% | €7,388.02 |
| €44,987 to €83,696 | 45.00% | €8,062.54 |
| Over €83,696 | 48.00% | €10,573.42 |
Gross Tax = Income (divided) × Marginal Rate − Deductible Portion
Step 4 - Tax Deductions
After determining gross tax, tax deductions are applied - amounts that directly reduce the calculated tax. The simulator considers the main deductions provided in article 78 and following of the CIRS:
Tax Deductions Table - 2025
| Expense Type | Deduction / Limit |
|---|---|
| Health Expenses (art. 78-C) | 15% - up to €1,000 |
| Education Expenses (art. 78-D) | 30% - up to €800 |
| Housing - Interest pre-2012 (art. 78-E) | 15% - up to €296 |
| General Family Expenses (art. 78-F) | 35% - up to €250/holder |
| Deduction per dependent (1st child) | €600 |
| Deduction per dependent (2nd and beyond) | €900 each |
Step 5 - Final Assessment
The final result is calculated by subtracting total deductions from gross tax, obtaining net tax. From this, the total withholding tax made throughout the year by the employer is deducted.
IRS to Pay = Net Tax − Withholding Tax
IRS Refund = Withholding Tax − Net Tax (when withholding exceeds the tax)
Practical Example
To illustrate the simulator's operation, consider a single taxpayer with no dependents, annual gross income of €24,000, withholding tax of €3,600, health expenses of €500 and invoices with TIN worth €1,500.
Simulator Result - Illustrative Example
| Component | Value |
|---|---|
| Annual Gross Income | €24,000.00 |
| Category A Specific Deduction | − €4,104.00 |
| Taxable Income | €19,896.00 |
| Gross Tax (25% bracket) | €3,506.40 |
| Health Deduction (15% × €500) | − €75.00 |
| General Expenses Deduction (35% × €1,500 → lim. €250) | − €250.00 |
| Net Tax | €3,181.40 |
| Withholding Tax | − €3,600.00 |
| IRS REFUND | €418.60 |
| Effective IRS Rate | 13.3% |
How to Use the Simulator
«Base Data» Tab
In the first tab, the user should fill in the essential fields:
- Annual Gross Income - sum of all gross payslips received in 2025
- Tax Status - choose between Single, Married with 1 Holder or Married with 2 Holders
- Number of Dependents - children or other dependents
- Total Withholding Tax - total amount withheld by the employer throughout the year
«Expenses» Tab
In the second tab, the user can enter the main deductible expenses. The simulator automatically applies the legal percentages and limits:
- Health Expenses - consultations, medication, glasses, surgeries, treatments
- Education Expenses - tuition, books, school supplies, childcare
- Housing Interest - only for mortgage contracts prior to 2012
- General Family Expenses - all invoices reported to the Tax Authority with the taxpayer's TIN
Interpreting Results
The results panel highlights whether there is IRS to Pay or Receive, with the respective amount. The effective IRS rate and a complete step-by-step calculation detail are also displayed for full transparency.
Simulator Limitations
- Applies exclusively to mainland Portugal residents with Category A income
- Does not cover income from other categories (B, E, F, G, H)
- Does not include specific deductions for certain professions, disability, or special tax regimes (e.g., NHR, IFICI)
- Brackets and values are based on available 2025 data and may be updated by the Tax Authority
- Housing interest only for contracts prior to 2012
For more complex tax situations, always consult a Certified Accountant.
Conclusion
The IRS 2025 Simulator is a useful and accessible tool that allows any employee to estimate, with a high degree of reliability, the result of their IRS declaration before official submission.
By understanding the calculation methodology - from the specific deduction to tax deductions - taxpayers are better equipped to make decisions throughout the year: adjusting withholding tax, saving invoices, or planning deductible expenses in health, education or housing.
Tax literacy is a tool for financial autonomy. Knowing how IRS works is not just an obligation - it's a real advantage in every citizen's daily life.
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