Investments in SMEs: Do deductions change with high income?
2 June 2026 | Author: Paolo Florio
The 2026 Budget Law cuts deductions for those earning more than 75,000 euros. However, incentives for startups and innovative SMEs are safe.
The Italian tax system constantly changes, and those who invest their capital seek clear rules to plan the future. The recent state economic maneuver introduces a severe tightening of benefits for wealthier taxpayers. Parliament intervenes heavily and limits the expenses that can be deducted from taxes for those exceeding a precise wealth threshold. This strict measure raises strong doubts about specific categories of expenditure, such as financial support for new and high-tech companies. In this article, we will analyze the following problem: Investments in SMEs: Do deductions change with high income? We will clearly and analytically illustrate how the new legislative limit works, who suffers the deduction cut, and which money transfers remain immune from this tax revenue recovery operation. The goal is to provide a reliable compass for investors.
How do the cuts to tax benefits work?
The general rule desired by the government imposes a clear brake on tax benefits for citizens with high overall income. The 2026 Budget Law (Law 199/2025) and the consolidated tax code (Article 16-ter of DPR 917/1986, TUIR) set a maximum cap on expenses that wealthier taxpayers can deduct. The legislative novelty directly affects those declaring more than 75,000 euros per year. The legislator does not eliminate tax benefits entirely but reduces them proportionally and precisely. The basic principle is simple to understand: the more a citizen earns, the fewer personal or family expenses they can subtract from gross tax. The state requires greater sacrifice from those with greater economic capacity. The calculation to determine the maximum deductible amount is based on a mathematical mechanism with two unknowns. The deductibility cap is obtained by multiplying a fixed value, called the base amount, by a coefficient linked to family composition and, in particular, the number of dependent children. This scissors system hits almost all expenses taxpayers include in their tax returns, but the law provides, fortunately for the real economy, absolute exceptions.
What is the base amount for the new spending limit?
To understand exactly how much money can be deducted, you must first identify the starting base amount established by the new rules. The law outlines two precise income brackets and allows no exceptions. For citizens declaring a total income above 75,000 euros and up to 100,000 euros, the base amount is 14,000 euros. The situation becomes even stricter and more restrictive for the higher wealth bracket. If the taxpayer's total income exceeds the psychological threshold of 100,000 euros, the calculation base drops drastically to just 8,000 euros. This division shows the legislator's clear intention to progressively penalize larger assets. However, be careful not to fall into an easy error: this starting figure (14,000 or 8,000 euros) does not represent the final amount that can be fully deducted. It is only the first element, the numerical foundation, of a specific mathematical operation. To obtain the actual final limit, the figure alone is not enough. You must apply the correction related to children, which represents the second and decisive step of the tax calculation.
How does the number of children affect taxes payable?
The second element of the mathematical calculation depends exclusively on the composition of the family unit. The law, in compliance with constitutional principles, protects citizens who have more dependents and face greater daily expenses for their children's maintenance. The family coefficient is applied as a multiplier to the base amount examined in the previous paragraph. This coefficient varies and increases proportionally based on the number of children. The regulations of the consolidated tax code include all children considered dependent for tax purposes. The legislator considers as valid children born within and outside marriage, provided they are formally recognized, adopted children, affiliated children, or children regularly entrusted. The percentage of spending that the citizen saves from the cut follows a strict numerical scheme provided by the law:
- 0.50, if there are no dependent children in the family unit;
- 0.70, if there is one dependent child in the family unit;
- 0.85, if there are two dependent children in the family unit;
- 1, if there are more than two dependent children in the family unit, or at least one dependent child with a certified severe disability (pursuant to Article 3 of Law 104/1992).
Practical example: How is the new deduction calculated?
Let's make a practical example to transform the abstract rule into reality. Imagine a professional, Mr. Verdi, who declares an income of 90,000 euros per year and has one dependent child. The taxpayer falls fully into the first income bracket (between 75,000 and 100,000 euros). Consequently, his base amount is 14,000 euros. Since the family unit includes only one dependent child, the law assigns Mr. Verdi a multiplication coefficient of 0.70. To find his maximum spending cap, Mr. Verdi must multiply 14,000 by 0.70. The result of this operation is 9,800 euros. This means that Mr. Verdi, on all deductible expenses incurred during the year (such as mortgage interest on the first home, university education expenses, life insurance premiums), can deduct a maximum total limit of 9,800 euros. Any money he spends beyond this threshold will not produce any tax benefit, and the discount will stop inexorably at that cap. But does this strong limitation blindly and indiscriminately affect every investment? The law's answer is negative and opens the door to safeguards provided for health and risk capital.
Which expenses remain excluded from the tax cut?
The legislator, even in a context of strong austerity on national public accounts, saves specific categories of spending and investment from the income limit. The deduction for these particular charges remains fully intact and unaffected. The tax benefit does not suffer any erosion, regardless of the taxpayer's annual income. The exclusion from the calculation of the total amount explicitly concerns three fundamental items of our social and economic system. The first and undeniable exception concerns health expenses. The right to health receives full protection and prevails over the state's cold budget logic. Deductible medical expenses never fall within the limiting cap (the legal basis for this exception is Article 15, paragraph 1, letter c, TUIR).
The second exception protects entrepreneurial courage and technological innovation. The sums invested in innovative startups maintain the original favorable rules without cuts (the legal reference is Articles 29 and 29-bis of Legislative Decree 179/2012, converted with amendments by Law 221/2012). The third and final exception concerns capital injected by citizens and holdings into innovative small and medium-sized enterprises (pursuant to Article 4, paragraphs 9, second part, and 9-ter, Legislative Decree 3/2015, converted with amendments by Law 33/2015).
Is investing in SMEs still worthwhile in the new year?
In light of all the regulatory rules analyzed so far, we provide the definitive legal solution to the initial question. Private individuals and holding companies that decide to finance the risk capital of innovative companies maintain their ample economic advantages intact. The answer to the initial doubt is certain and reassuring for the markets: the generous 30% deduction for those investing in an innovative small or medium-sized enterprise or a startup remains fully current, active, and operational. This form of incentive does not in any way fall within the cuts provided for individuals with incomes exceeding 75,000 euros.
This means that a very wealthy taxpayer suffers the limit on normal deductible expenses of daily life but can continue to directly deduct from their taxes an amount equal to 30% of the capital invested in highly innovative companies. In this specific business-related situation, they do not have to apply any cap based on the number of children or the base amount. The state wants at all costs to push private money towards the real economy and reward innovation. For this reason, Parliament shields and protects these benefits against any attempt at fiscal restriction, guaranteeing a legal and profitable escape route for large assets ready to bet on the future.
