Proposed Tax Reform: Minister Considers Raising Family Income Thresholds for Enhanced Deductions

by THEFUTURE.TEAM

November 11, 2025

Finance Minister Opens Door to Adjusted Income Limits

In a decisive parliamentary session marking the commencement of discussions on the proposed tax reform legislation, Finance Minister Makis Keravnos introduced the concept of revising the annual family income thresholds used to qualify taxpayers for additional deductions. This move signals a willingness to reconsider eligibility criteria to better reflect the evolving economic landscape.

Structured Tax Brackets and Expanded Relief Measures

The proposed reforms outline a significant adjustment in tax-free allowances and progressive tax brackets. The tax-free threshold is set to rise to €20,500, with additional incremental increases based on factors such as the number of children, students, and existing housing loans. Under the new scheme, incomes from €20,501 to €30,000 would be taxed at 20%, those between €30,001 and €40,000 at 25%, incomes from €40,001 to €80,000 at 30%, and earnings exceeding €80,000 would face a 35% rate. Notably, some taxpayers will only be able to claim further relief if their annual income does not exceed €80,000, although Minister Keravnos mentioned that an increase to €90,000 is also under consideration.

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Family-Based Deductions and Detailed Relief Structures

The legislation places special emphasis on family composition, offering additional tax exemptions accordingly. Households with a gross annual income of up to €80,000 qualify, with the threshold raised to €100,000 for larger families. More detailed deductions include a €1,000 annual reduction for each spouse, partner, or sole earner for every dependent child and student, doubling to €2,000 for single-parent families. Furthermore, taxpayers may avail an annual €1,500 deduction for interest on loans for primary residences or rental expenses, and an additional €1,000 deduction for capital expenditures related to energy upgrades and electric vehicle investments, which is transferable over the following four years.

A Strategic Adjustment to National Fiscal Policy

By considering an increase in the income threshold and refining tax brackets, the government aims to balance fiscal discipline with enhanced support for families. This initiative not only bridges the gap between economic realities and tax policy but also reflects an adaptive approach to managing public finances in challenging economic times.

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Cyprus Income Distribution 2024: An In-Depth Breakdown of Economic Classes

by THEFUTURE.TEAM

December 24, 2025

New findings from the Cyprus Statistical Service offer a comprehensive analysis of the nation’s income stratification in 2024. The report, titled Population By Income Class, provides critical insights into the proportions of the population that fall within the middle, upper, and lower income brackets, as well as those at risk of poverty.

Income Distribution Overview

The data for 2024 show that 64.6% of the population falls within the middle income class – a modest increase from 63% in 2011. However, it is noteworthy that the range for this class begins at a comparatively low threshold of €15,501. Meanwhile, 27.8% of the population continues to reside in the lower income bracket (a figure largely unchanged from 27.7% in 2011), with nearly 14.6% of these individuals identified as at risk of poverty. The upper income class accounted for 7.6% of the population, a slight decline from 9.1% in 2011.

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Income Brackets And Their Thresholds

According to the report, the median equivalent disposable national income reached €20,666 in 2024. The upper limit of the lower income class was established at €15,500, and the threshold for poverty risk was set at €12,400. The middle income category spans from €15,501 to €41,332, while any household earning over €41,333 is classified in the upper income class. The median equivalents for each group were reported at €12,271 for the lower, €23,517 for the middle, and €51,316 for the upper income classes.

Methodological Insights And Comparative Findings

Employing the methodology recommended by the Organisation for Economic Co-operation and Development (OECD), the report defines the middle income class as households earning between 75% and 200% of the national median income. In contrast, incomes exceeding 200% of the median classify households as upper income, while those earning below 75% fall into the lower income category.

Detailed Findings Across Income Segments

Upper Income Class: Comprising 73,055 individuals (7.6% of the population), this group had a median equivalent disposable income of €51,136. Notably, the share of individuals in this category has contracted since 2011.
Upper Middle Income Segment: This subgroup includes 112,694 people (11.7% of the population) with a median income of €34,961. Combined with the upper income class, they represent 185,749 individuals.
Middle Income Group: Encompassing 30.3% of the population (approximately 294,624 individuals), this segment reports a median disposable income of €24,975.
Lower Middle And Lower Income Classes: The lower middle income category includes 22.2% of the population (211,768 individuals) with a median income of €17,800, while the lower income class accounts for 27.8% (267,557 individuals) with a median income of €12,271.

Payment Behaviors And Economic Implications

The report also examines how income levels influence repayment behavior for primary residence loans or rental payments. Historically, households in the lower income class have experienced the greatest delays. In 2024, 27.0% of those in the lower income bracket were late on payments—a significant improvement from 34.6% in 2011. For the middle income class, late payments were observed in 9.9% of cases, down from 21.4% in 2011. Among the upper income class, only 3% experienced delays, compared to 9.9% previously.

This detailed analysis underscores shifts in income distribution and repayment behavior across Cyprus, reflecting broader economic trends that are critical for policymakers and investors to consider as they navigate the evolving financial landscape.

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