Austria Income Tax Explained 2026: Brackets, Credits & How It Works
Austria taxes personal income in 2026 on a seven-bracket progressive scale running from 0% on income up to €13,539 to 55% on income above €1,000,000. Tax credits called Absetzbeträge — including the transport credit (VKAB, €496) and the Familienbonus Plus (€2,000 per child under 18) — reduce the computed tax directly, euro for euro. This page is informational; consult a tax adviser for guidance tailored to your individual circumstances.
Austria's seven-bracket income-tax tariff for 2026
Austria uses a stepped progressive tariff: only the income within each bracket is taxed at that bracket's rate. The 2026 tariff (source: BMF — Federal Ministry of Finance) is: 0% up to €13,539; 20% from €13,539 to €21,992; 30% from €21,992 to €36,458; 40% from €36,458 to €70,365; 48% from €70,365 to €104,859; 50% from €104,859 to €1,000,000; and 55% on income above €1,000,000. The 55% top rate is temporary, legislated through 2029. Bracket thresholds are indexed annually to two-thirds of CPI inflation — for 2026 the adjustment factor was 1.733%, derived from a 2.6% CPI reading.
From gross income to the taxable base
The starting point is gross income. Employee social insurance contributions are deducted first, along with the flat employment-expense allowance (Werbungskostenpauschale) of €132 per year and any commuter allowance (Pendlerpauschale). The result is the annual Lohnsteuerbemessungsgrundlage (income-tax assessment base) on which the bracket tariff is applied. The resulting gross tax is then reduced by tax credits (Absetzbeträge). Monthly net pay equals gross salary minus social insurance contributions minus the monthly tax instalment (annual Lohnsteuer divided by 12).
Tax credits (Absetzbeträge) that cut your tax bill directly
Unlike deductions, Absetzbeträge reduce the computed tax euro for euro. All employees receive the transport credit (Verkehrsabsetzbetrag / VKAB) of €496 per year automatically; commuters who claim the Pendlerpauschale receive an enhanced VKAB of up to €853 at lower incomes. A low-income supplement (Zuschlag) of up to €804 phases out between €19,761 and €30,259 annual income. Parents can claim the Familienbonus Plus — €2,000 per year per child under 18 (€700 for qualifying older children) — and, if sole earner or sole parent, the AVAB or AEAB (€612 for one child, rising with each additional child).
Special pay: the Jahressechstel tax privilege
Holiday pay (Urlaubsgeld) and Christmas bonus (Weihnachtsgeld) are taxed at preferential rates in Austria, provided their total does not exceed one-sixth of regular annual pay (the Jahressechstel). Within that ceiling, the first €2,615 of special pay in the year is completely free of wage tax (Freigrenze). Above the Freigrenze, an initial tax-free tranche of €620 (Freibetrag) applies, with the remainder taxed at 6% up to €25,000, 27% up to €50,000, and 35.75% up to €83,333. Amounts above the Jahressechstel are taxed at normal progressive rates.
Employee tax return (Arbeitnehmerveranlagung)
Employees can file a voluntary annual tax return (Arbeitnehmerveranlagung / ANV) via FinanzOnline to reclaim over-withheld wage tax — useful when credits were not applied in payroll, when income varied across the year, or when actual work-related expenses exceed the €132 flat allowance. The filing window is five years after the relevant tax year. Filing is mandatory if you had two simultaneous employers or received certain benefits. Low earners who paid no Lohnsteuer may still claim the SV-Rückerstattung refund of up to €496 (or €750 for commuters with a Pendlerpauschale).
FAQ
What is Austria's top income-tax rate in 2026?
The top marginal rate is 55%, applying to income above €1,000,000 per year; this rate is temporary through 2029. For income between €104,859 and €1,000,000 the rate is 50%; between €70,365 and €104,859 it is 48%. All rates are sourced from the BMF official tariff published for 2026.
How does the Familienbonus Plus reduce income tax?
The Familienbonus Plus is a direct tax credit of €2,000 per year per child under 18 (€700 for children aged 18 and over who still receive Familienbeihilfe). It reduces computed wage tax down to zero but cannot generate a cash refund. Parents can split the credit 50/50. Low earners who cannot fully use it may qualify for the Kindermehrbetrag supplement of up to €700 per child.
Do I need to file an income-tax return as an employee?
Filing is mandatory if you had two or more simultaneous employers in the same year or received certain non-wage income. Otherwise it is voluntary but often worthwhile: claiming commuter allowances, excess work-related expenses, the Familienbonus Plus, or other credits frequently produces a refund. The voluntary return must be filed within five years of the tax year via FinanzOnline.
How are the income-tax brackets adjusted each year in Austria?
Since 2023 Austria automatically indexes income-tax brackets to two-thirds of the prior-year CPI inflation rate, eliminating fiscal drag (kalte Progression). For 2026 the adjustment was 1.733% — two thirds of the 2.6% CPI. The same factor applied to most Absetzbeträge and thresholds. The legal basis is § 33 Abs. 1 EStG as amended by the anti-bracket-creep legislation.
⚠️ Informational estimate, not tax advice. Payroll software may differ in edge cases. Verify with a professional.