The Italy–US Double Taxation Agreement ensures that a US citizen is not taxed twice on the same income. For the US investor that want buy real estate in Italy means that the agreement US-Italy they and Convention for the avoidance of double taxation.
If you receive rental income or any revenue from the property owned in Italy, you pay the corresponding taxes in Italy (e.g., IRPEF / cedolare secca). In the US, you can claim a foreign tax credit for the amount actually paid in Italy, up to a certain limit of your US tax liability.
Regarding property taxes, the US generally does not impose wealth taxes like the Italian IMU. The IMU is an Italian municipal tax that generally does not fall within the scope of the tax credit under the Convention. However, it is advisable to consult with a local advisor in Italy for regarding deductibility and the acceptable documentation.
Italy Property Legal Requirements: Compliance for Purchase, Possession, and Rental
For the purchase contract, as well as for possession (sale contract for bare ownership or usufruct) and leasing or rental, Italy requires the Registration Tax (imposta di registro)—or VAT if the seller or owner is a company—plus the potential Mortgage Tax (imposta ipotecaria) and Cadastral Tax (imposta catastale). Furthermore, the Notarial Deed (Rogito)and contract registration fees are mandatory legal requirements for the transfer of property.
Taxes Related Solely to Property Possession
In the case of sole property possession, the main taxes required are:
IMU and TARI: For the principal residence (prima casa) of an Italian resident, the IMU is not paid. For a non-resident foreign investor, the property is typically considered a “second home,” and thus the IMU tax payment is required.
Taxes on Residential Rental Income
The tax provided on rent or leasing of the property falls under the substitute regime, the cedolare secca (flat tax), in addition to contract registration fees. Flat tax rates can change, so periodic checks for updates are necessary.
Objective Data on Property Purchase Prices in Italy
The value of a property in Italy is set by the market. However, a good reference parameter for purchase prices and property values by region and zone are the OMI Real Estate Quotations from the Ministry (Osservatorio del Mercato Immobiliare – Italian Revenue Agency) to verify area values and the appropriateness of rents.
US Tax Compliance: What to Declare and How to Coordinate the Credit
Foreign Rental Income (Rent): As part of your US tax return, rental income from property in Italy requires the foreign tax credit for Italian taxes actually paid (IRPEF / cedolare secca), within the limit set by the Tax Treaty. Retain receipts / F24 and Revenue Agency documentation.
Financial Flows and Anti-Money Laundering: A key Italy property legal requirement is the traceability of funds. Open an Italian bank account for non-residents and schedule transfers. Agree with the Notary on the traceability and lawful origin of funds (due diligence). Prepare a documentary file (registered contracts, Italian tax receipts, OMI reports). Avoid cash and untraced channels; align the currency timeline with the date of the Notarial Deed (Rogito).
Checklist: Tax Credit Documentation for the US To obtain the foreign tax credit and avoid double taxation on any income from properties owned in Italy, it is advisable to follow this checklist and retain:
Lease Contract registered in Italy + proof of payment of IRPEF or cedolare secca taxes.
Copy of the F24 forms and payment receipts.
OMI extract (zone/segment) to support the appropriateness of rents and property value.
Documentation related to US reporting obligations (e.g., FBAR, FATCA).
Frequently Asked Questions: Tax Obligations and Italy Property Legal Requirements
Can I offset the IMU paid in Italy in the US? Generally no: IMU is an Italian local levy and typically does not fall under the income/wealth taxes covered for the purpose of the conventional credit.
Does rental income in Italy entitle me to a tax credit in the US? Yes, within the limits of the Convention: you can offset the tax actually paid in Italy (IRPEF / cedolare secca) against the corresponding US tax on the same income.
Where can I find official values for rents/area values? In the OMI database of the Italian Revenue Agency (Agenzia delle Entrate) (semi-annual quotations by Municipality/zone).
Integrated Consulting
Tax Planning Italy–US (tax structure, credits, documents).
Legal/Urban Planning Due Diligence and Assistance with the Notarial Deed (Rogito).
Business plan with OMI data and yield simulations.
If you want us to set up everything (contracts, registrations, documentation for US and Italian authorities), contact us for: International Tax Consulting · Tax Planning Italy–US · Legal and Urban Planning Verifications · Assistance with the Notarial Deed · Contact Us.
