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The State Income Tax Threshold 2025 – Everything You Need to Know
State income tax is an important part of the Swedish tax system and affects individuals with higher incomes. Each year, a threshold is set to determine when state income tax applies. In this article, you’ll get a comprehensive overview of the threshold for 2025, how it is influenced by the base deduction, and what it means for your finances.
What is State Income Tax?
State income tax is an additional income tax levied on top of municipal tax when income exceeds a certain threshold. While municipal tax is collected by your local municipality and is proportional to your income, state income tax only applies to higher incomes and serves as a progressive element in the tax system.
The purpose of state income tax is to contribute to the redistribution of resources and finance public services. This means that individuals with higher incomes pay a larger share of their income in taxes.
What is meant by the State Income Tax Threshold?
The threshold is the annual income before the base deduction that determines whether you will pay state income tax or not. If your income is below the threshold, you only pay municipal tax, but if it exceeds the threshold, state income tax is applied to the portion exceeding the limit.
For many, the threshold is an important reference point when planning salary and benefit withdrawals, especially for business owners who have the ability to influence their income.
State Income Tax Threshold 2025
In practice, the income tax threshold is the bracket limit for state income tax plus the base deduction. For the 2025 income year, the thresholds are as follows:
Individuals under 66 years old: SEK 643,100 per year, or approximately SEK 53,600 per month. (SEK 625,800 bracket limit + SEK 17,300 base deduction)
- Individuals who turned 66 before the start of the year: SEK 733,200 per year, or approximately SEK 61,100 per month. (SEK 625,800 bracket limit + SEK 107,400 base deduction)
If your total annual income before the basic deduction exceeds these amounts, you will pay a 20% state income tax on the portion of your income that surpasses the threshold.
The threshold is adjusted annually based on the income base amount, which in turn is linked to the general wage development in Sweden.
State Income Tax Threshold 2024
For the 2024 income year, the thresholds were as follows:
Individuals under 66 years old: SEK 615,300 per year, or approximately SEK 51,275 per month. (SEK 598,500 bracket limit + SEK 16,800 base deduction)
Individuals who turned 66 before the start of the year: SEK 697,300 per year, or approximately SEK 58,108 per month. (SEK 598,500 bracket limit + SEK 98,800 base deduction)
Example: How Does Your Tax Change at Different Income Levels?
If Your Income Is Below the Threshold
You earn SEK 630,000 per year and are under 66 years old. Since your income is below the threshold, you only pay municipal tax on your earnings. Your basic deduction further reduces your taxable income.
If Your Income Exceeds the Threshold
You earn SEK 700,000 per year and are under 66 years old. You pay municipal tax on your entire income, as well as a 20% state income tax on the amount exceeding SEK 643,100, which is SEK 56,900. The state tax on this amount totals SEK 11,380.
Strategies to Optimize Your Taxes
If you want to minimize your taxes, you can plan your income in relation to the threshold. Here are some useful strategies:
Dividends: Instead of increasing your salary, business owners may benefit from taking part of their income as dividends. Many choose to set their salary at the state income tax threshold and then supplement their income with dividends. Read our article on how dividends work for more details.
Pension savings If you’re already taking a salary up to the threshold and maximizing tax-efficient dividends, it may be beneficial to allocate funds to a pension insurance plan. Read our article on pension savings for more information.
Endowment insurance: If you’re satisfied with your pension savings or prefer to manage your investments yourself, you can invest your company’s surplus in a Endowment insurance policy (Kapitalförsäkring). It works in almost the same way as an investment savings account (ISK) does for private individuals. Read our article on Endowment insurance for more details.
What Happens If You Have Side Income?
If you have side income, such as from an additional employment or compensation from the Swedish Social Insurance Agency (Försäkringskassan), this can increase your total income and push you above the state income tax threshold. It’s important to account for all sources of income, not just those from your business, when planning your taxes.
Summary
The state income tax threshold is a key factor in determining how much tax you pay on your income. By understanding how the threshold works, you can plan your finances more effectively and avoid unnecessarily high taxes.
For more detailed information on taxes, visit the Swedish Tax Agency’s (Skatteverket) website, where you can always find the most up-to-date information.