Iceland Tax Calculator (2026)
Income tax rates and take-home pay for Iceland
Using Reykjavík for state/regional taxes. Region selection coming soon.
Iceland Income Tax Brackets (2025)
| Bracket | Income Range | Rate |
|---|---|---|
| Step 1 | ISK 0 - ISK 5,664,060 | 16.6% |
| Step 2 | ISK 5,664,060 - ISK 15,901,524 | 23.1% |
| Step 3 | ISK 15,901,524+ | 31.4% |
Tax credit: ISK 824,288
Municipal Income Tax
| Bracket | Income Range | Rate |
|---|---|---|
| Flat Municipal Rate | ISK 0+ | 14.9% |
Minimum Pension Fund Contribution
| Bracket | Income Range | Rate |
|---|---|---|
| Employee Share | ISK 0+ | 4.0% |
Contribution to the Elderly Fund
Fixed amount: ISK 14,093 per year
Contribution to the National Broadcasting Service
Fixed amount: ISK 21,400 per year
Key Facts
Tax Year
2025
Currency
ISK
Top Rate
31.4%
Brackets
3 brackets
Tax Credit
ISK 824,288
Social Contributions
3 items
Assumptions
- · The municipal income tax rate used is 14.94%, which is the standard withholding rate and the maximum rate for 2025.
- · The personal tax credit (ISK 824,288) is applied against the combined total of national and municipal income tax.
- · Employee pension contribution (4%) is deducted from gross income before calculating taxable income.
- · Worker is within the age range (16-69) for the Elderly Fund and National Broadcasting Service contributions.
Frequently asked questions
How much income tax will I pay if I move to Iceland?
Iceland uses a progressive tax system with three brackets: 16.55% on income up to ISK 5,664,060, 23.05% on income between ISK 5,664,060 and ISK 15,901,524, and 31.35% on income above ISK 15,901,524. You'll also pay municipal income tax at 14.94% (the rate for Reykjavik), and you can claim a personal tax credit of ISK 824,288 against your combined national and municipal tax.
What deductions can I claim on my Icelandic taxes?
The main deduction available is a 4% employee pension contribution, which is deducted from your gross income before calculating your taxable income. Additionally, you can claim a personal tax credit of ISK 824,288 against your total income tax liability, though this is not refundable if it exceeds your tax bill.
Are there mandatory pension contributions in Iceland?
Yes, employees must contribute 4% of their gross income to a pension fund, and this contribution is deductible from your income before taxes are calculated. On top of this, you'll also pay fixed contributions to the Elderly Fund (ISK 14,093) and the National Broadcasting Service (ISK 21,400), though these are not tax-deductible.
Do tax rates vary depending on where in Iceland I live?
Yes, municipal income tax rates vary by region; the calculator uses Reykjavik's rate of 14.94%, which is the standard withholding rate and maximum rate. If you live or work in a different municipality, your municipal tax rate could be different, so it's worth checking your specific location's rate.
What is the personal tax credit in Iceland and how does it work?
Iceland provides a personal tax credit of ISK 824,288 that is applied against your combined national and municipal income tax bill. This credit is non-refundable, meaning it can reduce your tax liability to zero but won't result in a refund if the credit exceeds the taxes you owe.
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