Individuals to See an Income Tax (ISR) Reduction in 2026

The newspaper El Norte interviewed Dr. Gustavo Leal Cueva, Managing Partner of Leal Benavides y Cía. and CEO of Fiscalia, to analyze the effects of the update to the Income Tax (ISR) brackets effective January 1, 2026. The issue is relevant because this is the first update to the tax brackets in three years and it comes after cumulative inflation exceeding 10%, the threshold that triggers the legal adjustment mechanism.

What changes in the ISR in 2026?

The Ministry of Finance will update the ISR brackets to reflect cumulative inflation since the last revision (November 2022). In practical terms, the same nominal income levels will face a lower tax burden compared with what applied through 2025.

Who benefits the most?

According to the analysis cited by El Norte:

• Monthly incomes close to 12,000 pesos—below the monthly minimum wage—would see an approximate 8.4% reduction in the tax payable.

• Those earning 24,000 pesos per month would see a reduction of about 6.3%.

• Across a broader range, taxpayers with monthly incomes between 24,000 and 192,000 pesos could experience reductions of between 9% and 2%, assuming their nominal incomes remained constant between 2022 and 2026.

The limits of tax relief

Dr. Leal Cueva emphasized that, while the adjustment eases the tax burden, it does not fully offset the loss of purchasing power caused by inflation. The adjustment is reactive and partial, and only occurs after cumulative inflation exceeds 10%.

Moreover, even considering an estimated inflation rate for 2025 of 3.74% (Banxico’s Survey of Expectations), taxpayers do not fully recover what was lost in previous years. Cumulative inflation from 2022 to 2026 would be around 21.99%, meaning the adjustment will compensate for only a fraction of the inflationary impact.

A structural problem: outdated brackets

A central point of the interview is the historical lag in the tax brackets. Between 2000 and 2018, the brackets were not updated, causing many taxpayers to:

• Pay more ISR in real terms.

• Move into higher brackets due to nominal increases that merely reflected inflation.

In Dr. Leal Cueva’s words, during that period taxpayers lost nearly 80% of their real income due to the ISR, and the adjustments resumed since 2020—including the one in 2026—are far from reversing that damage. Hence his conclusion: the brackets should be redesigned, with much wider ranges and a significantly lower tax burden.

Implications for taxpayers and companies

• Individuals with stable incomes will see partial relief.

• Those whose nominal incomes increased could still face higher rates despite the adjustment.

• Companies and payroll departments will need to recalibrate withholdings and projections for 2026, bearing in mind that the benefit is real but limited.

The interview in El Norte brings to the forefront an unresolved debate: the need for periodic and structural updates to the ISR to prevent inflation from effectively becoming a hidden tax.