General Rules
An Italian resident taxpayer has the right to certain deductions and claim a tax deduction or tax credit for certain expenses and charges incurred in the relevant tax return. Not many of these deductions/credits may be claimed by non-residents with taxable income in Italy.
If the income tax due is less than the total deductions, the taxpayer is not usually entitled to a refund of the excess. It is possible to opt to take certain deduction in the tax year in which they are incurred and in future years – e.g. if you have significant medical expenses in one year and do not have capacity to utilise in the year in which they were incurred.
If you are liable to tax under a flat or substitute regime you will likely not be able to benefit from most of these deductions unless you also have income that is liable to standard IRPEF and additional Regional and Municipal Taxes.
With the Finance Law 2020 deductions for expenses can only be claimed where payment is made by bank transfer or debit/credit card. Cash payments no longer qualify. The Law also reduces the certain deductions for taxpayers with income over Euro 120,000 and drops to zero for those with income over Euro 240,000. Many of the expenses, building restructuring and some mortgage interest deductions are not impacted by this, but like all the expenses described here may have their own limits and thresholds.
Many of the limits and thresholds are set in annual Finance Laws and other legislation, which can be issued during the course of the relevant year of receipt/payment so will need to be checked as the tax return is prepared.
There are some deductions/tax credits for income on a first home, employment, self employment and pension income which are covered in this post. Some of these can be obtained via the payroll if you are working in Italy via an Italian payroll.
Medical expenses are can best be claimed by showing your “tessera sanitaria” at the point of purchase (e.g. hospital clinic or pharmacy) and will be available to your tax preparer via the pre-compiled tax return available on the Tax Agency web site.
Expenses incurred outside Italy can often be claimed for deduction/tax credit providing adequate documentary evidence is available and in particular an invoice showing the taxpayer’s name and address and providing payment is not made in cash.
Copies of supporting documenting should be collated before a tax return is filed. The Italian tax return filing process does not require that documents are attached to the tax return but this documentation may be required if the Tax Agency ask to see it at a later stage and penalties for late payment and interest will apply if the taxpayer cannot prove that expenses were incurred and deducted according to the rules.
This is a general guide and not intended to be an exhaustive list of all deductible items.
Deductions for dependent family members:
In addition to deducting qualifying expenses incurred on behalf of dependent family members such as a spouse, civil partner, children, grandchildren, parents, etc. there are also “standard deductions” available for dependent spouses, civil partners and children.
A spouse, civil partner or child is considered to be dependent they have taxable income in the year of less than:
€ 2,840.51 for a spouse/civil partner (not legally separated and effectively separated);
€ 4,000 for a child (natural, recognized, adopted, entrusted or fostered) under 24, and concern;
€ 2,840.51 euros for a child up to 24 years and then to 2,840.51 euros for those of older age;
The deduction that is available (as a tax credit) is
- for a qualifying spouse/civil partner – a maximum of €800 – this starts to descends to zero for people with taxable income over € 15,000 – the descent is gradual up to €80,000 of taxable income after which no deduction is available.
- for children under 3 years of age, a basic tax credit of 1,220 Euros is due;
- for dependent children over 3 years of age: the deduction is 950 Euros for each child;
- for handicapped children: an additional deduction of 800 euros is available
There is generally no deduction for people with income over 95,000 euros.
Social Security and welfare/alimony payments.
Statutory social security and welfare contributions (i.e. INPS pension contributions and state pensions in the EU and countries with a social security treaty) – fully deductible as long as they are paid under legal obligation. Voluntary payments may not qualify for a deduction;
Costs of supplementary contributions (“ticket”) to the Italian national health service;
Charges for private and individual pension contributions up to € 5,164.57 per annum;
Contributions to the disabled;
Periodic maintenance allowances to separated or divorced spouses, excluding periodic maintenance allowances for children;
Contributions paid for compulsory INAIL insurance for family members – protection against domestic accidents (so-called home insurance);
Voluntary state social security contributions paid to cover University years and reunification of contributions between Italian social security funds;
The cost of certain social security contributions for maids, nannies and baby sitters up to € 1,549.37.
Payments to schools for education of children.
Primary, secondary schooling and university education expenses are one of the items that can be deducted in the Italian tax return.
The deduction of school expenses is allowed for expenses up to Euro 800 per child. 19% of the expenditure is admitted as a deduction, giving a maximum tax credit of Euro g a maximum of Euro 152.
From 2021 procedures exist allowing educational institutions to communicate the relevant expense to the Tax agency at year end, so that the relative amount is shown in the draft pre-complied online tax return. However, taxpayers will not always find the expenses incurred indicated, considering that until the 2021 tax year the transmission of data for educational institutions is optional. It is therefore a good idea to carefully check the amounts incurred in order to be able to benefit from the relevant deduction.
Payment of fees must be with a traceable means of payment. For university students away from home, there is also a specific deduction on rent costs.
Deductible costs include those incurred for attendance at crèches, kindergartens, elementary and middle schools, secondary schools, i.e., both state and parity high schools, and for enrolment in university or specialisation courses at public or private universities. The costs include not only course fees but also meals, school trips and transport to and from school.
Assistance for the disabled
Disabled nursing and rehabilitation assistance: where prescribed by a doctor.
Medical costs for the disabled: nursing staff and technical assistance workers, professionally qualified staff coordinating personal care, animation and occupational therapy activities.
Expenses for the assistance and hospitalization of the disabled
Vehicle expenses for people with disabilities
Expenses for the purchase of guide dogs
University rent expense deduction
Among the costs that can be claimed as a tax deduction are those relating to the cost incurred for the rent for off-campus University students subject to a ceiling of Euro 2,633 annually.
The amount that can be offset against income tax is 19 per cent of the expenditure incurred, i.e. a maximum tax credit of Euro 500.
Building Maintenance, Improvements and Energy‑Saving Expenditure (2025 Onwards)
A number of tax incentives remain available for building maintenance, renovation and energy‑saving works. These incentives have been simplified in recent years following the withdrawal of the temporary superbonus measures. The remaining incentives apply to specific categories of expenditure and are subject to statutory limits, technical requirements and documentation rules. The credits apply only to IRPEF and cannot be used to reduce regional or municipal surtaxes.
The renovation credit is available for ordinary and extraordinary maintenance, restoration and building improvements carried out on residential properties. The credit is calculated as a percentage of the qualifying expenditure up to the statutory annual limit and is spread over several years. The incentive is intended to support the upkeep and modernisation of the existing housing stock.
Energy‑saving incentives remain available for specific interventions that improve the energy efficiency of a property, such as insulation, replacement of windows and doors, and installation of high‑efficiency heating systems. The credit is calculated as a percentage of the qualifying expenditure and is subject to technical certification and compliance with energy‑performance standards.
A separate credit is available for the purchase of furniture and household appliances where the expenditure is connected to qualifying renovation work. This credit is subject to its own annual spending limit and applies only where the renovation work meets the statutory conditions.
The rates, limits and technical requirements for these incentives are subject to amendment via the political process for adoption of legislation. Taxpayers must retain invoices, payment records and technical documentation to support the claim, and the credit is generally applied through the annual tax return.
Mortgage and Rent
Interest on mortgage loans for purchase of the “prima casa” – first home where you are registered as resident.
Rent paid by low-income tenants: personal income tax deduction of 300 euros, if total income does not exceed 15,493.71, 150 euros if taxable income is higher than 15,493.71 but lower than 30,987.41 euros.
Rent of a principle residence for an employee who transfers residence for reasons of reasons: a deduction of 991.60 euros where income is less than 15,493.71 euros and 495.80 euros if the total income exceeds 15,493.71 euros but is less than 30,987.41 euros.
Rent for the main home for young people between 20 and 30 years: deduction of € 961.60 for total income up to € 14,493.70.
Rent for university students living away from home: deduction is 19%, calculated on an amount not exceeding 2,633 euros.
Protected tenancy arrangements: a deduction of 495.80 euros is due, where is income is less than 15,493.71 euros and 247.90 euros, if total income is higher than 15,493.71 euros but lower than 30,987.41 euros .
Deductible Healthcare Expenses
A taxpayer has a tax credit equal to 19% of the total documented healthcare expenditure over € 129.11 incurred in the year as well as for healthcare costs of prior years which were taken in instalments.
To qualify for a deduction medical expenses you must give to us/your tax preparer
- A copy of the receipt or invoice showing the name of the medical practitioner or firm to whom payment was made, details of the service provided and your fiscal code number.
- Made payment by credit card/bank card or by bank transfer/paypal. If you paid in cash the amount is not deductible.
- Confirmation that the expense is duly deductible (feel free to discuss this with us).
Medical expenses are deductible even if reimbursed under a health insurance policy with two broad exceptions:-
- Health insurance policies paid for your employer and which have not been treated as a taxable fringe benefit;
- Specific expenses covered by a third party insurance – e.g. you were involved in a road accident and the damage is covered by a third party’s insurance policy.
Other
- Funeral Expenditure
- Baby sitting and nursery costs
- Veterinary expenses (invoice/receipt must show the others tax code)
- Credit for foreign taxes (providing proof of payment is available)
Help and Assistance
If you need help with your deductions or require any further information please contact us here