$IRS Income Categories, in Summary
The Portuguese IRS Code organizes the income of an individual into six active categories: A (employment), B (business and professional), E (capital — interest and dividends), F (real estate — rents), G (capital gains and other property income) and H (pensions). It is common to have income from more than one category in the same year — for example, a salary (A) and interest from a brokerage account (E).
Understanding which category each type of income fits into is the first step to correctly filling out the IRS — and to understanding, before investing or accepting new income, how that money will be taxed. This guide summarizes the six categories, what was left out (categories C and D), and the applicable rates in 2026.
The Six Income Categories in Force
| Category | Designation | Examples of Income |
|---|---|---|
| A | Employment | Salary, allowances, commissions, taxable benefits from employment |
| B | Business and professional | Invoicing by freelancers, service provision, commercial activities |
| E | Capital | Interest from deposits and accounts, dividends, income from financial investments |
| F | Real estate | Rents from leased properties |
| G | Capital gains | Capital gains from the sale of stocks, ETFs, bonds, crypto assets, and real estate; compensations |
| H | Pensions | Retirement, disability, survivor pensions, and retirement supplements |
What Happened to Categories C and D?
If you searched for “IRS Category C” or “IRS Category D” and found nothing, it’s not a mistake: these categories existed in the past (C covered commercial and industrial income, D covered agricultural, forestry, and livestock income) but were eventually consolidated into the current Category B, which now encompasses all business and professional income for individuals. Currently, there are only six active categories: A, B, E, F, G, and H.
IRS Brackets in 2026 (Categories A, B, and H)
Income from categories A, B, and H (employment, professional activities, and pensions) is taxed progressively, in brackets — the higher the income, the higher the marginal rate applied only to the portion that exceeds each threshold:
| Taxable Income | Marginal Rate |
|---|---|
| Up to €8,342 | 12.5% |
| €8,342 – €12,587 | 15.7% |
| €12,587 – €17,838 | 21.2% |
| €17,838 – €23,089 | 24.1% |
| €23,089 – €29,397 | 31.1% |
| €29,397 – €43,090 | 34.9% |
| €43,090 – €46,566 | 43.1% |
| €46,566 – €86,634 | 44.6% |
| Over €86,634 | 48% |
Bracket table for Mainland, fiscal year 2026. Each bracket also has an associated deduction — to calculate your exact situation, use the Finance Portal simulator or confirm with a certified accountant.
Categories E and G: The Flat Rate of 28%
Unlike categories A, B, and H, capital income (Category E) and most capital gains from securities (Category G — sales of stocks, ETFs, bonds, crypto assets) do not follow progressive brackets: they are taxed independently at a fixed rate of 28%, regardless of the bracket an individual falls into with other incomes.
This has two important practical implications:
- Those in a lower bracket (for example, 12.5% or 15.7% in Category A) may opt for aggregation of these incomes, to be taxed at the progressive rate instead of the flat rate — this is only beneficial if the applicable marginal rate is lower than 28%;
- For capital gains from stocks and ETFs, Law 31/2024 introduced a holding period discount, reducing the effective rate from 28% to as low as 19.6% depending on how long the securities have been held before selling — we explained this table in detail in our guide on ETFs.
We have explained how to declare this income, from a foreign broker like Freedom24, in our guide Freedom24 and the IRS in Portugal: How to Declare in Annex J, and you can estimate the tax on a specific sale using our capital gains calculator.
Why It’s Useful to Know the Category Before Investing
Before opening a position — whether it’s a term deposit, an ETF, or a property to rent out — it’s worth understanding which category the income will fall under because this changes how it is taxed: interest and dividends (Category E) and capital gains from financial assets (Category G) follow the flat rate of 28% with potential holding period discounts; rents (Category F) may be taxed independently at 25% or by aggregation; salary and pensions always follow progressive brackets. Consulting the financial glossary helps clarify other related terms.
Frequently Asked Questions About IRS Income Categories
Perguntas frequentes
Currently, there are six active categories: A (employment), B (business and professional), E (capital), F (real estate), G (capital gains), and H (pensions). The former categories C and D were consolidated into Category B.
Dividends and interest received through a broker fall under Category E (capital income), taxed independently at 28%, unless aggregation is chosen.
Capital gains from the sale of stocks, ETFs, and bonds fall under Category G (capital gains), taxed independently at 28%, with a progressive discount based on the holding period since Law 31/2024.
Aggregation is the option to combine income usually taxed at flat rates (such as those from Categories E and G) with other incomes, to be taxed at the progressive rate by brackets instead of the fixed rate — only beneficial when the taxpayer's marginal rate is lower than the flat rate.
Educational content, not tax advice. The rates and brackets refer to the fiscal year 2026 and may be updated in future State Budgets — always confirm current values on the Finance Portal or with a certified accountant before making decisions.