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2026 Tax Guide for Americans in Italy

When am I tax resident in Italy?

Italian tax residency is governed by Article 2(2) of the Italian Income Tax Code (TUIR), which was rewritten by Legislative Decree 209/2023 with effect from 1 January 2024. You are resident for a given year if, for the greater part of the tax period (183 days, not necessarily consecutive and counting fractions of a day), any one of the following applies:

your habitual abode is in Italy;
your domicile is in Italy; or
you are simply physically present in Italy.

Now the registration with the anagrafe of your commune is no longer conclusive: since 2024 it creates only a presumption of residency, which can be overcome by evidence to the contrary. The reverse is also true, in that physical presence in Italy for more than half the year can make you resident even if you never register at all.

Will Italy tax me on my U.S. income?

Yes, if you are a tax resident in Italy, you will be taxed on your worldwide income, including any income generated in the U.S. The exact nature of the taxation will be determined by Italy’s tax laws, the Double Taxation Agreement, and whether you are enrolled in any Italian tax regimes.

Will I pay taxes twice – to Italy and the U.S.?

Usually not, but the relief is narrower than it is often described. The Italy-U.S. tax treaty allocates taxing rights between the two countries, and Article 165 TUIR then allows a credit against Italian tax for taxes paid abroad. That credit is not a deduction from income: it cannot exceed the Italian tax attributable to the foreign income, and only foreign taxes that have become final qualify.

No Italian credit is available where the income is taxed in Italy under a substitute tax rather than at ordinary rates, which is the position for most foreign interest, dividends and portfolio gains. U.S. state income taxes are not covered by the treaty and are not accepted as creditable.

Are there ways to mitigate my Italian taxes?

Possibly, although each regime carries strict entry conditions.

The neo-resident regime under Article 24-bis TUIR replaces ordinary taxation of all foreign source income with a flat substitute tax. Since 1 January 2026, the amount is 300,000 euros a year, with a further 50,000 euros for each family member included in the option. The regime requires that you were not tax resident in Italy in nine of the ten preceding years, it lasts up to fifteen years, and while it is in force it also carries exemption from IVIE, IVAFE and the foreign asset reporting obligation.

The inbound worker regime, redesigned by Article 5 of Legislative Decree 209/2023, exempts 50% of qualifying income (40% where there are dependent minor children) up to 600,000 euros a year for five years, and requires a high level of qualification or specialisation together with three to seven years of prior non-residency depending on your links with the Italian employer. It covers only employment, similar and self-employment income.

The 7% flat tax under Article 24-ter TUIR is open to holders of a foreign source pension who were not resident in Italy for the previous five years and who move to a qualifying municipality in the southern regions. It runs for nine tax periods. The population threshold for eligible municipalities has recently been raised to 30.000 inhabitants, so the list should be verified at the time of the move.

Is my Social Security benefit taxed in Italy?

Yes, and in principle Italy alone. The Italy-U.S. treaty contains no dedicated provision on social security, so U.S. Social Security benefits paid to a resident of Italy fall under Article 18, which provides that pensions and other similar remuneration are taxable only in the State of residence. This is an exclusive right rather than a first right. On the Italian tax return, the benefits are reported as income assimilated to employment income and taxed at ordinary progressive rates.

Article 19 does not alter this: it deals with remuneration and pensions paid for services rendered to a government, and Social Security is a general welfare benefit rather than a payment for public service. A genuine government service pension is taxable only in the paying State, unless the recipient is both a resident and a national of the other State.

How will my 401k or IRA distributions be taxed in Italy?

Under Article 18 of the treaty, Italy has the exclusive right to tax these distributions; the United States taxes its own citizens by virtue of the saving clause and gives relief on its own return. In Italy, periodic distributions from a 401(k) or an IRA are generally treated as pension income assimilated to employment income under Article 49(2)(a) TUIR and taxed at ordinary progressive rates.

The account itself must in any case be reported in the foreign asset section of the Italian return.

Is my Roth IRA or Roth 401k still considered tax-free in Italy?

No. Italy does not give effect to the U.S. exemption, and distributions are in principle taxable here on the same basis as distributions from a traditional IRA or 401(k).

Should I move my investment accounts to Italy when I move?

We typically advise clients against moving their investment accounts over to Italy when they move. There is no equivalent to an IRA or Roth IRA in Italy, and these cannot be rolled over into a European account. Any distribution to a European account from these plans is a taxable event.

For taxable brokerage accounts, there are very few local investment options that are tax efficient for Americans. Considering that Americans must always adhere to IRS rules around taxation of investments, we cannot typically invest in European mutual funds or ETFs without significant U.S. tax consequences. As a result, it is easier and more tax efficient to maintain U.S.-custodied investment accounts.

The U.S. financial system is also cheaper, more transparent, and has more investment options.

Is there a wealth tax in Italy?

Yes, although broadly referring to the tax as a "wealth tax” is a bit of a misnomer. For U.S. nationals establishing residency in Italy, two specific wealth taxes often come into focus: IVIE (Imposta sul Valore degli Immobili situati all’Estero, or tax on foreign real estate) and IVAFE (Imposta sul Valore delle Attività Finanziarie detenute all’Estero, or tax on foreign financial assets).

IVIE (Imposta sul valore degli immobili situati all’estero)

IVIE applies to real estate located outside of Italy and owned by Italian tax residents. Practically speaking, this means that if you maintain a property in the U.S., e.g., a family home, vacation house, or investment property, you must account for IVIE in your Italian tax return.

The rate is 1.06%, for property outside the European Union and the European Economic Area, including the United States, the taxable base is the acquisition cost shown in the deed of purchase, or the market value where no such cost can be determined, and it is not revalued year by year.

Italian law does allow a credit against IVIE for taxes paid abroad on the same property, but for non-EU countries only taxes of a wealth nature qualify, and the Italian tax authorities have never confirmed that U.S. state and local property taxes fall within that category.

IVAFE (Imposta sul valore delle attività finanziarie detenute all’estero)

IVAFE, by contrast, applies to financial assets held abroad, such as bank and deposit accounts, shares, bonds, mutual funds and insurance policies.

Once you become an Italian tax resident, these assets fall within IVAFE at 0.2% of their value on 31 December, or at the end of the holding period.

Both charges are intended to mirror the taxes that would apply to Italian investment accounts and Italian property. Foreign pension plans such as 401(k)s and IRAs must be reported in the RW section of the return, but the prevailing view is that no IVAFE is due on them.

Current accounts and savings deposits are subject to a fixed charge of 34.20 euro per account, which does not apply where the average balance of the accounts held with the same intermediary does not exceed 5,000 euro. Accounts held with Italian banks fall outside both IVAFE and the foreign asset reporting obligation, since they are domestic.

Does Italy really need to know about my accounts and income from abroad?

Yes. If you are tax resident in Italy, you must report your foreign assets each year in the RW section of the Italian return, the Quadro RW, whether or not those assets produce any income.

This is not a formality that passes unnoticed: under the FATCA intergovernmental agreement, U.S. financial institutions report accounts held by Italian residents and the data reaches the Italian tax authorities automatically, so your return is matched against information they already hold. Italy also has a dedicated financial police force, the Guardia di Finanza.