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Between the exquisite food, the rich history and culture, and the diverse landscapes — from big cities to seaside villages to rolling hills — who hasn’t dreamed of packing it all up and moving to Italy? Thanks to the rapid growth of remote work in recent years, that dream is more achievable than ever.
Of course, before making a transatlantic move, you’ll need to think about practical considerations, like taxes, first. While taxes for US expats can be complex, we have years of experience helping Americans all around the world navigate theirs — and we’re here to break things down for you.
Snapshot of Taxes in Italy
- Primary tax forms: Modello 730, Modello Redditi PF
- Tax deadline: September 30th for Modello 730, November 30th for Modello Redditi PF
- Reporting website: SPID (Public Digital Identity System)
- Administrative language(s): Italian
- Tax treaty: Yes
- Totalization agreement: Yes
Taxes in Italy for foreigners
Taxation in Italy varies depending on tax residency status. Italian tax residents are subject to taxation by the Italian government on worldwide income, while non-tax residents are only subject to taxation on Italian-sourced income.
If you are a tax resident, or a non-tax resident who earns Italian-sourced income, then you must file a tax return, unless:
- You work for a single employer that withholds your income taxes from your paycheck
- You earn less than €8,000 in employment income, or €7,500 in retirement income
Employees and retirees file Modello 730, while the self-employed and non-tax residents file Modello Redditi PF.
Who qualifies as a tax resident in Italy?
Italy defines tax residents as those who live in the country for more than 183 days in a year and have either:
- Registered as official residents, OR
- Established a habitual abode in Italy, OR
- Made Italy the center of their business, economic, or social interests (e.g. having a family there)
To stay in Italy for longer than 90 days, you’ll need a long-stay visa, also called a D-Visa/National Visa. Some of the most common long-stay visas that Americans living in Italy hold include:
Italy Work Visa
For those who have been offered a job by an Italian employer.
Italy Self-Employment Visa
For freelancers, small business owners, entrepreneurs, independent contractors, and other self-employed individuals.
Italy Student Visa
For those enrolled at an educational institution in Italy.
Italy Family Reunification Visa
For the spouses, minor/dependent children, or dependent parents of Italian citizens or Italian residents.
Italy Elective Residence Visa (Italy Retirement Visa)
For those who earn enough in passive income (or have enough in savings) to financially support themselves.
Italy Digital Nomad Visa (pending!)
While not yet officially launched, Italy has approved a visa that would allow highly-skilled digital nomads to legally work and live in the country for one year, with the possibility to renew afterward.
Obtaining Italian Citizenship by Descent
Italy offers a pathway to citizenship for those who can prove via official documentation that they are directly related to an Italian citizen, which can be an option for Americans with Italian heritage (although it takes longer than getting a visa).
What’s the tax-governing authority in Italy?
Agenzia delle Entrate
The Agenzia delle Entrate, or Italian Revenue Agency, is Italy’s tax-governing body, primarily responsible for educating and assisting taxpayers, collecting taxes, and enforcing compliance.
Income tax rates in Italy
In Italy, there are three levels of income tax: national, regional, and municipal. The national income tax rates in Italy for the 2023 tax year are as follows:
| Taxable Income (EUR) | Taxable Income (USD) | Tax Rate |
|---|---|---|
| €0 – €15,000 | ~$0 – $16,526 | 23% |
| €15,001 – €28,000 | ~$16,527 – $30,847 | 25% |
| €28,001 – €50,000 | ~$30,848 – $55,084 | 35% |
| €50,001+ | ~$55,085+ | 43% |
Regional income taxes range from 1.23% to 3.33%, while municipal income taxes range from 0% to 0.9%.
Property taxes in Italy
There are a few different property taxes in Italy:
Buyers generally pay:
- Imposta di registro: The tax for registering properties, ranging from 2% – 9% for properties bought from individuals, or €200 for those bought from IVA-registered businesses (e.g. developers, real estate companies)
- Imposta catastale: The tax for registering land. Properties bought from individuals are charged €50, while properties purchased from businesses are charged €200.
- IVA: A sales tax applied only to properties purchased from businesses, charged at a rate of 4% for first-time homeowners, 10% for second homes or homes the owner won’t live in, and 22% for luxury homes
- Imposta ipotecaria: The mortgage tax, charged at a rate of €50 for properties purchased from individuals or €200 for properties purchased from businesses
Owners generally pay:
- Imposta Municipale Unica (IMU): The property ownership tax, charged at an average rate of 1.06%. Does not apply to primary residences unless they’re considered luxury properties
- Tributo per i Servizi Indivisibili (TASI): The public services tax. Rates vary from municipality to municipality
Residents — whether or not they are also owners — generally pay:
- Tassa sui rifiuti (TARI): The waste collection tax. Rates vary widely from municipality to municipality
Capital gains tax in Italy
Those who earn income from selling certain assets (e.g. real estate, stocks, dividends, etc.) are charged at a flat rate of 26% of the net gains.
Payroll tax in Italy
Employees have their income taxes withheld from their paychecks by their employers according to the rates mentioned above, while social security taxes are withheld at an average rate of 10%.
Those who are self-employed, however, have no employer to withhold these taxes, and must therefore make these payments proactively.
Do I have to pay social security in Italy?
A totalization agreement prevents American expats in Italy from paying social security taxes to both governments, but which country they pay social security taxes to depends on how long they will be living in Italy:
- 0-5 years: Pay US social security taxes
- 5+ years: Pay Italian social security taxes
VAT
The value-added tax in Italy — referred to locally as the Imposta sul Valore Aggiunto (IVA) — has a standard rate of 22%, although there are exceptions:
- 10% IVA: Power supplies, certain drugs, etc.
- 4% IVA: Certain food, drinks, etc.
- Exempt from IVA: Educational/insurance/certain financial services, etc.
What are the filing deadlines in Italy?
Italy’s tax deadlines depend on which of two forms a taxpayer must submit:
- Modello 730: September 30th
- Modello Redditi PF: November 30th
Do US expats living in Italy also have to file US taxes?
Yes. All US citizens and permanent residents who meet the minimum income reporting requirements must file a tax return, even if they don’t live in the country. While they still must pay any taxes owed by April 15th, Americans abroad are granted an automatic filing extension until June 15th which can be extended further to October 15th.
Does Italy have a tax treaty with the US?
Yes, Italy has a tax treaty with the US designed to prevent double taxation on income and capital gains. However, it contains a clause that allows the US to tax its citizens as if the treaty didn’t exist, so its benefits are limited. The safest bet to avoid double taxation is by taking advantage of the tax breaks mentioned below.
Common tax breaks for expats in Italy
Foreign Tax Credit (FTC)
The FTC allows Americans abroad to claim foreign tax credits against US tax due, provided that the taxes are a) legal, b) made out in the individual’s name, c) based on income, and d) must be paid.
By claiming these credits, the vast majority of US expats in Italy won’t end up owing any US income tax. To do so, file Form 1116 along with your federal tax return.
Foreign Earned Income Exclusion (FEIE)
The FEIE lets US expats exclude the first $120,000 (as of tax year 2023) of their earned income from taxation. Those eligible for the FEIE can also write off qualified housing expenses (e.g. rent, utilities, occupancy taxes) through the Foreign Housing Exclusion. To be eligible for the FEIE, you must meet one of two tests:
Physical Presence Test
Americans who have been outside of the US for 330 days in a 12-month period meet the Physical Presence Test.
Bona Fide Residence Test
Americans who are official residents of another country and can prove it with official documents (e.g. residence cards, rental contracts, utility bills) meet the Bona Fide Residence Test.
Child Tax Credit (CTC)
The Child Tax Credit allows Americans — both stateside and abroad — to claim partially-refundable tax credits. Expats typically receive up to $1,500 per qualifying child/dependent.
Tax implications of renting out your US residence while in Italy
If you own property in the US, renting it out can help subsidize the cost of living in Italy — you’ll just have to report rental income and expenses on Form 1040. However, because this income is passive rather than earned, it can’t be excluded through the FEIE.
Rental income while living in Italy: Frequently Asked Questions
If I own a rental property in the US or outside of Italy, do I have to report it to Italy?
Tax residents in Italy are required to report worldwide income, which includes rental income from foreign properties. Because non-tax residents only have to report Italian-sourced income, though, they don’t have to report foreign rental income to Italy.
Which country do I pay taxes to on my rental property income?
Non-tax residents only pay taxes on rental income from a US property to the US government. Tax residents, however, would be subject to taxation by both governments. Fortunately, they can avoid double taxation by claiming the FTC.
US expats living in Italy may need to file an FBAR
If you have more than $10,000 in aggregate in foreign financial accounts at any time during the tax year, you must file FinCEN form 114, better known as a Foreign Bank Account Report (FBAR).
If you have financial assets registered outside the US worth over $200,000 on the last day of the tax year, or over $300,000 at any point in the tax year, you must declare them on Form 8938. Note that this threshold is much lower for those who reside in the US.
I’m a US expat who’s lived in Italy for years. Do I owe past US tax returns?
Yes. A US citizen or permanent resident must file a tax return for any year they reach the minimum income threshold. If you failed to file any in the past, you should do so as soon as possible.
Catch up on US taxes with the Streamlined Procedure
Thankfully, the IRS offers an amnesty program called the Streamlined Procedure that lets expats who weren’t aware of their previous tax obligations catch up on them with no penalties. To qualify, you must a) not have already been notified about outstanding taxes, b) not currently be under IRS investigation, and c) certify that your earlier failure to file was unintentional.
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