--- title: Tax-free income 2026 date: 2025-12-02T10:33:21Z modified: 2026-07-26T10:46:52Z permalink: "https://grow.ee/maksuvaba-tulu-2026/" type: post status: publish excerpt: Starting in 2026, tax-free income of €700 per month will apply to all working-age people, the tax bracket will disappear, and the income tax will remain at 22%. wpid: 15190 featured_image: "https://grow.ee/wp-content/uploads/2025/12/Maksuvaba-tulu-scaled.jpg" timestamp: 2026-07-26T10:46:52Z tags: - Accounting --- ![](https://grow.ee/wp-content/uploads/2025/12/Maksuvaba-tulu-scaled.jpg) The Estonian tax system has been constantly changing in recent years, but the 2026 income tax reform is one of the most important. The previous complex system of calculating tax-free income, where the benefit depended on the amount of income and created a so-called tax hump, will disappear. Instead, a uniform and simple tax-free income will be established for all people of working age. The change will affect both employees and employers: for employees, it means more money and predictability, and for employers, clear rules regarding declarations and tax calculations. Let's take a closer look at what this reform entails and how to adapt to it. **What will change?** From January 1, 2026, the tax-free income for all working-age people will be 700 euros per month, or 8,400 euros per year. For people of retirement age, it will be even higher – 776 euros per month (9,312 euros per year). And most importantly: tax-free income will no longer depend on income. The complicated so-called tax bracket, which until now reduced the benefit even for the average salary, will disappear. The income tax rate will remain at 22%, so the increase to 24% will not occur. Tax calculations will become clear and predictable. **Practical example** Let's assume that you earn 1,500 euros per month. Previously, tax-free income would have decreased and the calculations would have been complicated. Now the tax-free income is 700 euros, the taxable part is 800 euros. The result: more money in your bank account and less headache due to calculations. The average wage earner earns over 1,800 euros a year compared to the previous system. This is not just a number – it is a vacation, home renovation or an investment in the future. **Employer obligations 2026** The tax-free income reform does not only affect employees – employers must also follow certain rules. **Implementation of tax-free income based on an application** - Tax-free income is calculated only based on the employee's written application. - The employee can choose which employer the tax-free income is applied to (if there are several jobs). - The employee can indicate in the application: - full tax-free income (€700 per month); - a lower amount than he wishes. - If the application contains the wording "according to the statutory rate", the employer can apply the current amount without asking for a new application. **Calculation based on the month of payment and declarations** - Tax-free income is applied on a cash basis – according to the date of payment. - Example: December salary is paid in January → 2026 rates apply. - The employer must correctly submit TSD declarations. - If there is no declaration, income tax must be withheld from the first euro. **Information and documentation of employees** - It is necessary to inform employees of the changes and ask them to submit declarations before the January payments. - The employer can provide a sample declaration form, refer to the EAMT instructions and consolidate the declaration information for payroll accounting - Declarations must be **stored**[ in accounting](https://grow.ee/wp-content/uploads/wp-mfa-exports/page/raamatupidamine.md) to prove the correctness of the tax calculation if necessary. **Summary** The 2026 tax-exempt income reform is not just a technical change. 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