Italy taxes for expats: income tax, rates, deadlines, and US filing in 2026

US citizens and green card holders living in Italy file a US return every year, no matter where the income comes from. If you are an Italian tax resident, Italy also taxes your worldwide income through IRPEF and the regional and municipal surtaxes. Nonresidents pay Italian tax only on income sourced inside Italy.

The Foreign Tax Credit and the Foreign Earned Income Exclusion are the two main tools that prevent the same dollar from being taxed twice. For most expats in Italy the FTC does most of the heavy lifting because Italian rates run higher than US federal rates at the same income level.

This guide covers Italian tax rates, residency rules, deductions, tax benefits for expats in Italy, treaty relief, deadlines, and the US forms you still need to file alongside your Italian return.

Resident vs. non-resident in Italy

Whether Italy taxes your worldwide income or only your Italian-source income depends on residency – this is the single most important distinction in Italian taxation for Americans abroad.

If you are an Italian tax resident, IRPEF applies to everything you earn, anywhere in the world. If you are a nonresident, IRPEF applies only to income earned inside Italy – salary from an Italian employer, rent from an Italian apartment, gains on Italian real estate, or business income from an Italian establishment.

Here is the practical difference for a US expat:

 

Italian residents must report foreign accounts, investments, real estate, and certain crypto-assets for Italian monitoring purposes. Depending on the return used, this is generally done through Quadro W in Modello 730 or Quadro RW in Modello Redditi PF. This is separate from US FBAR and Form 8938 obligations, which still apply on the US side.

If you also pay taxes abroad, see how the Foreign Tax Credit and FEIE interact before choosing your method.

Who can be considered a resident of Italy?

Meeting any one of these tests for most of the year can make you an Italian tax resident:

• habitual residence in Italy
• domicile in Italy, meaning the place where your personal and family relationships are mainly maintained
• physical presence in Italy, counting even fractions of days
• registration in the resident population register, unless you can prove the registration does not match your actual residence

Italy's personal income tax rules define how each test is evaluated, including what counts as a center of vital interests.

A few concrete scenarios show how this works in practice:

• A US remote worker who lives in Milan for seven months becomes an Italian tax resident on the 183-day test, even if their employer is in Texas.
• An American retiree registered in the Anagrafe in Lucca can become an Italian tax resident if that registration applies for most of the tax year, unless they can prove it does not reflect actual residence in Italy.
• A dual resident under both US and Italian rules applies the US–Italy tax treaty tie-breaker, which looks at permanent home, personal and economic ties, habitual abode, and citizenship in that order.

Americans who also hold Italian citizenship should understand AIRE: Italian citizens who move abroad for more than 12 months generally must register with AIRE. Non-Italian citizens leaving Italy should instead focus on properly updating or cancelling their Italian residence registration and documenting their departure.

The same logic exists on the US side for green card holders, which is why the Substantial Presence Test matters when you go back to the US after a stint in Italy.

This is the Italian tax for foreigners rule that catches the most Americans: residency is determined by your facts on the ground, not by visa type or by where your employer is located.

Types of taxes in Italy

The Italian tax system combines national income tax, two layers of local surtax, consumption taxes, wealth taxes on foreign-held assets, and property taxes. Knowing which apply to you is what makes the rest of the return calculable.

Here is the Italy taxation system at a glance for US expats:

 

If you are planning the move itself, our guide on moving to Italy from the USA walks through what to do in the months before and after arrival.

Personal income tax rates

For tax year 2025, filed in 2026, income tax in Italy uses three national IRPEF brackets:

 

These are the Italy tax brackets that apply to your 2025 income, filed in 2026. Regional and municipal surtaxes are added on top of the IRPEF amount, not bundled into the rate.

A worked example: an Italian tax resident with €60,000 of taxable income owes €6,440 on the first €28,000 (23%), €7,700 on the next €22,000 (35%), and €4,300 on the final €10,000 (43%) – a national IRPEF bill of €18,440 before deductions, credits, regional surtax, and municipal surtax.

 

For the US side, Americans living in Italy typically use either the Foreign Earned Income Exclusion or the Foreign Tax Credit to offset their US tax bill.

Regional income tax

Each of Italy's 20 regions sets its own surtax within a national framework, and the income tax rate in Italy at the regional level generally ranges from 1.23% to 3.33% of taxable income.

The rate depends on where you have your tax residence on December 31, not where you work. A resident of Rome pays Lazio's rate, a resident of Milan pays Lombardy's, and so on – which is why two expats earning the same salary can owe different totals.

Municipal income tax

The municipal income surtax (addizionale comunale IRPEF) is a separate levy of 0% to 0.9% on the same taxable income, set by each comune. It is not the same as IMU – IMU is the property tax and is covered separately below.

A practical illustration of the Milan tax stack: a US expat working in Milan pays national IRPEF, plus the Lombardy regional surtax, plus the Milan municipal surtax, on the same salary. Rome, Florence, and smaller comuni each apply their own rates within the 0%–0.9% range.

Value Added Tax (VAT)

Italy's standard VAT (IVA) rate is 22%, with reduced rates of 10%, 5%, and 4% applied to specific categories of goods and services.

 

VAT is a consumption tax built into the price tag, not a US-style sales tax added at checkout. For most US expats, VAT is something you pay – not something you file.

Net wealth tax

Italian residents owe wealth taxes on assets held outside Italy, and these are entirely separate from US FBAR and FATCA obligations.

The two main ones for US expats are:

• IVIE – 1.06% on the value of foreign real estate (including US homes and rental property)
• IVAFE – 0.2% on foreign financial assets (US brokerage accounts, foreign bank balances, foreign retirement accounts in many cases), reported via Quadro RW
• Imposta di bollo – 0.2% stamp duty on Italian-held financial accounts and securities

If you own a US brokerage account, a 401(k), a Roth IRA, and a US rental property, expect to see them on Quadro W (Modello 730) or Quadro RW (Modello Redditi PF) once you become an Italian resident.

The Italian filing is also separate from – and does not replace – the US FBAR or Form 8938, which is why expats with both ties should understand how FBAR differs from Form 8938 before they file either one.

Inheritance tax

Italian inheritance tax (imposta sulle successioni) is charged at 4%, 6%, or 8% depending on the relationship between the deceased and the heir, with significant exemptions:

 

A US expat inheriting from a US relative still owes Italian inheritance tax if they are an Italian tax resident, depending on where the assets sit and on treaty rules. Heirs must file a declaration of estate with the Agenzia delle Entrate within 12 months of the date of death.

 

Our guide to foreign inheritance tax walks through the full US-side reporting.

Gift tax

Italian gift tax (imposta sulle donazioni) uses the same rates and exemptions as inheritance tax – 4% with a €1 million exemption for spouses and direct descendants, 6% for siblings (with a €100,000 exemption) and other relatives within the fourth degree, and 8% for unrelated recipients. Italy treats lifetime transfers and bequests under the same inheritance and gift tax regime.

On the US side, gifts from a non-US person above $100,000 in a tax year still trigger Form 3520 reporting for the US recipient, even if no US tax is due.

Excise duties

Italy levies excise taxes (accise) on tobacco, alcohol, fuel, and a handful of other categories. These are folded into the retail price and are not filed separately by individuals, so for most US expats this is background information rather than a return-level concern.

Regional tax on productivity (IRAP)

IRAP (Imposta Regionale sulle Attività Produttive) is a regional tax on business activity, generally around 3.9% but varying by region and sector. It generally applies to companies, partnerships, professional associations, certain entities, and public administrations. Since 2022, individuals carrying on business activities or arts and professions are generally outside IRAP.

A US expat operating as an individual freelancer or sole trader should confirm whether any entity or association structure creates an IRAP filing obligation.

Our small business owners service page covers the US-side filing for expats running businesses abroad, including how IRAP interacts with the Foreign Tax Credit.

Stamp duty

Stamp duty (imposta di bollo) applies to a range of documents – bank and brokerage statements, certain contracts, and official acts. For most US expats, the version that matters is the 0.2% annual stamp duty on Italian-held financial accounts and the flat charge on bank statements.

Italian bank stamp duty does not exempt your accounts from US reporting – if you hold an Italian bank account, you should still check whether your accounts are exempt from FATCA reporting on the US side.

Property tax

IMU (Imposta Municipale Unica) is Italy's main property tax. It is calculated on the cadastral value of the property multiplied by a coefficient and a rate set by each municipality, typically between 0.46% and 1.06% of the revalued cadastral value.

Primary residences are usually exempt from IMU unless the property is classified as luxury (cadastral categories A/1, A/8, A/9 – essentially stately homes, villas, castles). Second homes always pay, and the rate is set by the comune where the property sits.

For an American buying a holiday home in Tuscany, IMU is an annual cost worth budgeting before purchase. TASI, the old separate services tax, was abolished in 2020 and folded into IMU – so today there is one consolidated property tax rather than two.

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Tax rate in Italy compared to the US

Italy's top Italian tax rate of 43% kicks in at €50,000, while the top US federal rate of 37% only applies above $626,350 for single filers in 2025.

Because Italy's top 43% national IRPEF bracket begins at a much lower income level than the top US federal bracket, many US expats in Italy find that Italian income tax is higher on ordinary earned income. The actual comparison depends on deductions, credits, local surtaxes, income type, and any special regimes.

A side-by-side view of the two systems:

 

You can verify the US side directly against the IRS federal income tax rates and brackets for 2025.

This comparison also explains the planning logic for taxes in Italy vs. the US: because Italian IRPEF rates on ordinary earned income are often higher than US federal rates at the same income level, the Foreign Tax Credit frequently wipes out the US federal income tax on that income. The actual outcome depends on deductions, credits, and income type. The exception is unearned US-source income, where the credit is more limited.

Filing income tax returns in Italy

For taxes in Italy for foreigners, many US expats use Modello Redditi PF, but foreign assets alone do not automatically rule out Modello 730: eligible taxpayers can report foreign investments and financial assets in Quadro W of Modello 730.

Which Italian return you file:

 

Most US expats fall into the third row – they have at least one US account, US retirement plan, or US property. Eligible taxpayers can use Modello 730 with Quadro W; others use Modello Redditi PF with Quadro RW.

Italian filing deadlines do not align with US deadlines, so US expats need both calendars open at the same time – our overview of US filing deadlines for expats sets out the US side.

When to file a tax return in Italy

For 2025 income filed in 2026, the Modello 730 deadline is September 30, 2026, and the Modello Redditi PF deadline is October 31, 2026 – but because October 31 falls on a Saturday in 2026, the practical Redditi PF deadline shifts to Monday, November 2, 2026.

Italian tax payments run on a different track from filing. The balance for 2025 plus the first advance for 2026 are due by June 30, 2026 (or July 30, 2026 with a 0.4% surcharge), and the second advance is due by November 30, 2026.

Here is how the Italian and US calendars line up for an American resident in Italy:

 

If you need more time on the US side, our guide on filing for a tax extension explains how to file Form 4868 and the special Form 2350 extension used when expats still need to meet the 330-day test.

Penalties for late or incorrect filing

Italy treats late filing and underpayment separately, and both can be reduced if you self-correct before the tax authority gets to you (the ravvedimento operoso mechanism).

If you missed an earlier US return while living in Italy, the Streamlined Foreign Offshore Procedures generally allow you to catch up without penalty when the failure was non-willful.

Penalties for late filing

Italian late-filing and late-payment penalties scale with how late you are:

 

The full late-payment schedule is set out in the PwC summary of Italian tax administration. On the US side, our guide to streamlined filing compliance procedures covers how to clean up missed years.

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Penalties for incorrect filing

Understating income or overstating deductions in Italy carries a penalty of 90% to 180% of the additional tax due, reducible if you correct voluntarily.

Common triggers for US expats:

• unreported Italian rental income (especially short-term lets)
• missed or incomplete Quadro W or Quadro RW for foreign accounts and assets
• missed FBAR on the US side – cleaned up via the delinquent FBAR submission procedures
• US 401(k) or Roth IRA holdings not declared on Quadro W or Quadro RW

The Italian rules and the US rules trip people up in different ways, but the safe move is to coordinate the two before either return is filed.

Types of income in Italy

Italian tax law groups income into six categories, each taxed under its own rules. Knowing which bucket a payment falls into determines whether it lands on Modello Redditi PF, the cedolare secca regime, or imposta sostitutiva.

A scan of the categories with the US expat angle:

Employment income

Employment income is taxed under IRPEF with monthly withholding by your Italian employer, who issues the Certificazione Unica (CU) by March 16 of the following year. The CU is Italy's W-2 – it shows gross pay, withholdings, and benefits in kind such as company car or housing.

For a US expat employed by an Italian company, the CU is also the source document your US preparer needs to claim the Foreign Tax Credit on Form 1116. Wages reported on the CU translate directly to US-side reporting.

Business income

Business income covers profits from running a business as a sole trader, partnership, or other transparent entity. It is taxed under IRPEF for individuals or IRES (24%) for corporations, with IRAP potentially layered on top.

US expats running a small business in Italy typically file a US Schedule C in addition to their Italian return, and the US self-employment tax of 15.3% still applies unless covered by the US–Italy totalization agreement. Entity choice matters here – a non-US business can be classified for US tax in ways that trigger Form 5471, Form 8865, or Form 8858 reporting depending on the structure.

Self-employment income

Self-employment income is taxed under IRPEF, with social security paid into INPS or the relevant professional fund. Individual freelancers and sole traders are generally not subject to IRAP, but partnerships, professional associations, companies, and other structures may be. VAT registration is mandatory once gross receipts cross the regime forfettario threshold.

Here is the trap that catches consultants: a US software consultant living in Florence and billing US clients is taxable in Italy on that income, because Italian residents are taxed on worldwide income regardless of where the clients sit. The same income is reported on a US Schedule C, and self-employment tax is owed in only one country under the US–Italy totalization agreement.

Our page for Americans working abroad walks through the US-side coordination.

Property income

Rental income from Italian property is taxed under IRPEF, but landlords can elect cedolare secca – a 21% flat rate on long-term residential rents (10% for agreed-rent contracts in designated municipalities) that replaces IRPEF, regional surtax, and registration tax on the rent.

For a US expat owning Italian rental property:

• the Italian tax (cedolare secca or IRPEF) goes on Form 1116 as a foreign tax credit
• the rental activity is reported on US Schedule E
• US depreciation rules apply on the US side – 30-year straight-line for foreign residential real estate, which differs from the Italian treatment

For US-side mechanics, our foreign rental income tax guide covers depreciation and reporting in detail.

Capital gains

Italy generally taxes capital gains at a flat 26% imposta sostitutiva, with significant carve-outs:

 

US expats should also remember that any gain reported in Italy is generally also reportable on US Schedule D, with the FTC available to offset the US tax. Our guide to capital gains tax on foreign property covers the timing rules.

Exempt income

Some income is exempt or taxed at preferential rates in Italy – but Italian exemption never means US exemption, and the same exemption can be lost under the US–Italy treaty's savings clause.

Categories that may receive Italian relief:

• foreign-source pensions under the 7% retiree regime (covered below)
• foreign-source income under the lump-sum regime for new residents
• a portion of employment income under the inbound worker regime
• scholarships and grants meeting specific conditions

Each of these regimes has eligibility rules and US-side complications, and the US–Italy tax treaty governs how the relief lines up against the US tax bill.

Social security in Italy

Italy's social security system (INPS) covers pensions, healthcare, unemployment, maternity, and family benefits – and a US–Italy totalization agreement decides which country's system you contribute to when you work across both.

For expat tax in Italy, the totalization agreement determines which country you pay into – here is how it breaks down:

 

The US–Italy totalization agreement sets out the rules, and our overview of Social Security benefits for Americans living abroad covers how US benefits work once you're collecting from Italy.

Benefits for expats in Italy

Expats who pay into INPS qualify for the same benefits as Italian citizens – Italian state pension, public healthcare through the SSN, unemployment benefits, maternity and paternity leave, and family allowances. Eligibility depends on your contribution history, your residence permit status, and the type of work you're doing, and the full benefit rules are administered by INPS.

Italy pension system

Italy's pension system is largely funded by INPS contributions, with a standard retirement age of 67 and benefit amounts based on years of contributions and lifetime earnings. For US expats who retire in Italy, the more important question is how Italy taxes US-source retirement income.

Three categories worth flagging:

• US Social Security: treaty treatment is nuanced. Social Security-type payments are addressed under the treaty's pension rules, but US citizens must also consider the saving clause and US domestic Social Security rules. An Italian resident should confirm the treaty position before assuming residence-only taxation.
• Traditional IRA and 401(k) distributions: usually taxable in Italy as foreign pension income; the FTC offsets the US-side tax
• Roth IRA: Italy does not have a clear treaty-based equivalent of the US Roth exemption, so distributions can be taxed in Italy even though they would be tax-free in the US

Contribution history can be combined between systems under the US–Italy totalization agreement when working out US Social Security eligibility.

Italy tax breaks for expats and new residents

Italy offers three preferential regimes that can dramatically reduce the Italy tax rate for foreigners moving to the country. Each has its own eligibility test, time limit, and US-side complication.

The three main regimes:

 

This Italy expat tax break can be combined with the US Foreign Tax Credit, but the math changes – if Italy taxes you less, your US tax bill rises by roughly the same amount, unless the FEIE handles part of it. The PwC summary of the lump-sum tax regime and inbound worker regime covers the eligibility detail.

How US expats in Italy avoid double taxation

Italy taxes worldwide income for residents, the US taxes worldwide income for citizens and green card holders, and the way you stop the same dollar from being taxed twice is by choosing the right combination of FTC, FEIE, and treaty positions. Italian taxes for expats in this context usually means picking FTC over FEIE.

The three tools at a glance:

 

For most expats earning ordinary employment income in Italy, the FTC alone eliminates US federal income tax on that salary. The full comparison sits in our guide to Foreign Tax Credit vs. Foreign Earned Income Exclusion.

One caveat: if you fall under the inbound worker regime, your Italian tax is reduced – which reduces the FTC available to offset US tax, so a portion of US tax may remain due even though Italy has given you a break.

Tax deductions for expats in Italy

Italy uses a mix of deductions (subtracted from taxable income) and credits (subtracted from tax owed), with most expat-relevant items falling on the credit side. Knowing the difference matters because credits often outweigh deductions on a euro-for-euro basis.

The common items for Italy tax for expats:

Personal deductions

Italy allows deductions from taxable income for specific recurring costs – the largest are social security contributions paid into INPS, alimony to a divorced spouse (not child support), and certain donations to qualified institutions. Deductions reduce the income figure on which IRPEF is calculated, so they're most valuable at the top marginal bracket.

Personal allowances and dependent-related relief

Italy does not use a US-style personal exemption, but it does provide tax credits for dependents that directly reduce IRPEF owed.

The main allowances:

• spouse credit, phasing out by income
• per-child credit (since 2022 largely replaced by the universal child allowance Assegno Unico paid through INPS)
• credit for other dependents, including elderly parents

The amounts are calibrated by income, with relief concentrated at lower and middle income levels.

Business deductions

Self-employed expats and business owners can deduct ordinary and necessary business expenses against gross receipts, with VAT-input rules layered on top for those outside the regime forfettario.

Common deductible items:

• home office costs (proportional to use)
• professional subscriptions and certifications
• accountant and legal fees
• travel and transport for business
• equipment, software, marketing

Losses

Business losses can generally be carried forward in Italy to offset future profits of the same activity, subject to documentation and category rules. The carry-forward is typically unlimited in time for ordinary business losses, but losses from the first three years of activity have separate, more generous rules.

Tax credits for expats in Italy

Italian tax credits reduce IRPEF directly, so a €1,000 credit is worth more than a €1,000 deduction at any income level. Note that these are entirely separate from – and not to be confused with – the US Foreign Tax Credit.

A consolidated view of the main credits for tax in Italy for foreigners:

Employment tax credits

Italy gives employees an IRPEF credit that phases down as income rises, with the highest relief at the bottom of the bracket structure. This is not the same as the US Foreign Tax Credit – the Italian credit reduces Italian IRPEF, while the US FTC reduces US tax on Italian-source income.

Pension income tax credit

Pensioners receive a separate Italian credit calibrated to total pension income, with relief concentrated at lower pension levels. This credit is distinct from the 7% retiree flat-tax regime, which is an alternative to ordinary IRPEF rather than a credit against them.

Self-employment tax credit

Self-employed individuals get a lower credit than employees, also income-tested. The treatment depends heavily on whether you use ordinary IRPEF accounting, the regime forfettario (5% or 15% substitute tax), or a professional fund (cassa), so a generic figure can mislead.

Family tax credits

Family credits cover dependent spouse, dependent children (now largely replaced by the universal child allowance Assegno Unico for children under 21 in most cases), and other dependents. Higher relief is generally available for larger families and for households with younger or disabled dependents.

Other tax credits

The remaining credits cover specific expense categories rather than household status:

• 19% on mortgage interest for primary home (up to €4,000 of interest)
• 19% on medical expenses above €129.11
• 19% on education costs within caps
• 19% on life and accident insurance premiums
• 19% on certain sports club fees for minors
• Credit for renters of primary residence, income-tested

Each is claimed on the Modello 730 or Redditi PF return, and traceable-payment rules apply to most of them.

The tax treaty between the USA and Italy

The US–Italy tax treaty is the framework that decides which country has primary taxing rights on each category of income, prevents the same income from being taxed twice, and limits source-country withholding on cross-border payments.

The provisions most relevant to US expats in Italy:

• general double-tax relief through credit mechanism, with the country of residence usually granting the credit
• savings clause: the US keeps the right to tax its citizens as if the treaty weren't in place, except for specific carve-outs
• pensions and Social Security: generally taxable only in the country of residence
• Roth IRA: not clearly protected; distributions may be taxable in Italy
• Treaty-based return positions may require Form 8833 disclosure, but exceptions apply. For example, some treaty claims involving pensions, annuities, or Social Security may not require Form 8833. Check the Form 8833 instructions before filing.

Our dedicated US–Italy tax treaty guide walks through each article in plain English.

Totalization agreement between the USA and Italy

The US–Italy totalization agreement is separate from the income tax treaty and covers social security only. It prevents double social security contributions and lets you combine US and Italian credits when qualifying for retirement, disability, or survivor benefits.

The practical effect: while the tax treaty is about income tax (IRPEF and US federal income tax), the totalization agreement is about contributions (INPS and US FICA/SE tax). They are administered separately, and you may need both to be applied correctly in the same year.

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Most popular tax forms for US expats

US expats in Italy typically file several US forms in addition to their Italian return. The list below covers the income tax in Italy for expats, crosswalk to US filings.

 

Italian mutual funds and ETFs are nearly always PFICs for US purposes, which makes Form 8621 one of the more common surprise filings for new Italian residents. The IRS list of forms for international taxpayers sets out the full US-side roster.

When are taxes due in Italy?

The Italian tax year matches the calendar year – January 1 to December 31 – and the 2026 filing season covers 2025 income.

A consolidated tax calendar for an American resident in Italy:

 

Italian taxpayers make payments using F24 forms, which also handle surcharges for late payment and the reduced penalties available through ravvedimento operoso.

Italy tax forms for US expats

The Italian forms a US expat may encounter are different from the US forms covered above. "Modello Unico" is an outdated name – the current form is Modello Redditi PF.

The Italian-side forms:

 

The Agenzia delle Entrate's filing portal handles e-filing of all of these, with SPID or CIE credentials required for access.

US expats with US accounts, investments, property, or crypto should confirm whether Modello 730 with Quadro W is sufficient or whether their income profile requires Modello Redditi PF with Quadro RW.

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