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. Some, but not all, 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.
Also note that if you are liable to tax under a flat regime you will likely not be able to benefit from most of these deductions.
With the Finance Law 2020 deductions for expenses can only be claimed for payment 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. Medical expenses, building restucturing and some mortgage interest deductions are not impacted by this.
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 no deduction for people with income over 95,000 euros.
Income tax return 2021: List of deductible and deductible expenses:
Taxpayers can deduct expenses of certain types and in some cases subject to thresholds. For 2020 tax the list is as follows:
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.
Gifts and payments to charity etc.
Charity payments to religious institutions;
Charity payments to non-governmental organizations;
Charity payments to ONLUS (26% with a maximum limit of 30,000.00 euros);
Donations to political parties (26% tax credit);
Donations to amateur sports clubs and associations, mutual aid societies, social promotion associations, cultural society “La Biennale di Venezia”, cultural and artistic activities, entities operating in the show and foundations operating in the music sector.
Donations to universities, research bodies – tax credit of 26% of the cost.
Most of these deductions depend on the recipient of the gift/payment being tax resident in Italy since it is necessary to provide the recipients an Italian fiscal code. However it may be possible to deduct payments to non Italian organisations but a case by case review is required.
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
Building maintenance and improvements
Superbonus 2021 – 110%
Ecobonus 65% and 50% for building renovations;
Household equipment 2020;
Home bonus 2020;
Earthquake bonus 2020;
Energy saving bonus 2020.
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.
Baby sitting and nursery costs
If you need help with your deductions or require any further information please contact us here