Tax & Legal
Taxes in Italy for Americans: Income Tax, Reporting and Special Regimes
Plan for US and Italian filing, foreign-account reporting, progressive income tax and the eligibility and cross-border limits of Italy’s special tax regimes.
Americans moving to Italy need to plan for two tax systems. Becoming an Italian tax resident can bring Italian tax obligations, while U.S. citizenship generally means continuing to report worldwide income to the United States.
Italy offers several special tax regimes that may be attractive to qualifying newcomers, including a 7% regime for certain foreign pension recipients and an exemption for qualifying workers. These are not automatic, and their value depends on both Italian and U.S. tax rules.
The following is an overview of rules and figures available as of October 2026. Before moving, obtain coordinated advice from professionals familiar with both U.S. and Italian taxation—particularly if you receive a pension, own investments or are considering a special tax regime.
Do Americans living in Italy still have to file U.S. taxes?
U.S. citizens living abroad generally remain subject to U.S. federal income tax filing rules. If your income meets the applicable filing requirements, you will ordinarily file Form 1040 and report your worldwide income, even if you also file an Italian return.
Filing a return does not necessarily mean you will owe U.S. income tax. Available credits and other provisions may reduce the amount due, depending on your circumstances.
You may also have separate reporting obligations for financial accounts and assets outside the United States. Two commonly confused requirements are the FBAR and Form 8938.
What is an FBAR?
The Foreign Bank Account Report, or FBAR, is filed separately from your federal income tax return on FinCEN Form 114.
It generally applies if you have a financial interest in, or signature authority over, qualifying foreign financial accounts whose combined value exceeds $10,000 at any time during the calendar year. The threshold is based on the aggregate value of the accounts, not just the balance of one account.
For example, if you have more than one qualifying Italian account, the balances may need to be considered together when determining whether an FBAR is required.
What is FATCA Form 8938?
Form 8938 reports specified foreign financial assets when the applicable reporting threshold is met. The thresholds differ according to factors such as filing status and whether you qualify as living abroad.
Form 8938 and the FBAR have different rules. Some accounts may need to be reported on both, so filing one does not automatically satisfy the other requirement.
When might you become a tax resident in Italy?
Your Italian tax position depends on the facts of your move and how Italian law applies to them. Relevant questions can include where you live, where your personal ties are and how much time you spend in Italy.
Do not assume that tax residence begins only when a residence card arrives, or that remaining registered at an address in the United States automatically prevents Italian tax residence. Ask an adviser to assess your expected arrival date, living arrangements and time in each country.
Italian tax residents are generally subject to Italian taxation on worldwide income, subject to applicable rules, treaty provisions and any special regime that applies. This makes the timing of a move worth considering before you sell investments, take a pension distribution or make other significant financial decisions.
What are Italy’s income tax rates?
Italy’s ordinary national personal income tax is known as IRPEF. For 2026, the national rates are progressive:
- 23% on taxable income up to €28,000.
- 33% on the portion from over €28,000 to €50,000.
- 43% on the portion above €50,000.
A progressive system means the higher rate generally applies to the portion of income in that bracket, rather than to all of a person’s income. Regional and municipal surcharges may also apply, and different rules can apply to particular types of income.
These rates alone do not tell you your final tax bill. Deductions, credits, income classification, local surcharges and any eligible special regime can change the result.
Will the U.S.–Italy tax treaty prevent double taxation?
The U.S.–Italy income tax treaty provides rules intended to reduce double taxation, but it does not guarantee that every item of income will be taxed in only one country.
The result depends on the type and source of income, residence, citizenship and the relevant treaty provisions. The treaty also contains a saving clause that preserves the United States’ right to tax its citizens in many circumstances.
U.S. foreign tax credits may reduce or eliminate U.S. tax on some income that is also taxed abroad. However, credits are subject to eligibility rules and limits; they are not always a dollar-for-dollar offset against every U.S. tax.
This is particularly important for retirees. U.S. Social Security, private pensions and government pensions may be treated differently, and treaty outcomes can depend on citizenship as well as residence. Have an adviser review each income source rather than assuming all retirement income receives the same treatment.
Italy’s 7% flat tax for qualifying retirees
Italy offers a special 7% substitute tax for certain people who receive a qualifying foreign pension and transfer their tax residence to an eligible municipality.
The regime can be attractive to retirees considering southern Italy. It is not a general discount for everyone who moves south, however: pension eligibility, prior residence, municipality and other conditions must all be checked.
Italy’s tax agency describes eligible municipalities in specified southern regions and certain earthquake-affected areas, generally with populations of no more than 30,000 under the current rules. Confirm the particular municipality and its eligibility before choosing a property or committing to a move.
What does the 7% rate apply to?
The regime can apply to qualifying foreign-source income, not just the foreign pension that helps establish eligibility. The treatment of a particular pension, investment, rental payment or gain should be checked individually.
The regime is generally available for the year of election and the following nine tax years if the conditions continue to be satisfied. Italian-source income is a separate issue and may remain subject to ordinary Italian rules.
Why U.S. citizens should examine both tax systems
A low Italian tax rate does not automatically mean that an American’s combined U.S. and Italian tax will be 7%. A lower Italian tax payment can also mean less foreign tax available to use as a U.S. credit, and the treaty treatment of the income matters.
Before moving for this regime, ask advisers in both countries to model your expected income—including Social Security, pensions, investments and any rental income—and explain the combined result.
Italy’s €300,000 flat tax for certain new residents
Italy has a separate lump-sum tax regime for qualifying high-net-worth individuals who move their tax residence to the country.
For qualifying individuals transferring residence from January 1, 2026, the annual substitute tax is €300,000 for the principal taxpayer. Earlier arrivals may be subject to different amounts depending on when they moved. The election can generally last for up to 15 years, subject to the rules of the regime.
The distinction is that the lump sum generally applies to qualifying foreign-source income. It should not be described as covering all worldwide income: Italian-source income is generally taxed separately under applicable Italian rules.
This is a specialized regime with detailed eligibility conditions. A U.S. citizen considering it should also obtain advice on how the Italian lump sum interacts with U.S. tax and foreign tax credit rules. A favorable Italian outcome does not by itself establish the overall U.S.–Italian result.
Italy’s tax relief for qualifying workers
Italy also has an impatriate regime for qualifying workers who transfer tax residence to Italy. Under the newer regime, eligible employment and self-employment income can receive a 50% exemption from Italian taxable income, subject to conditions and limits.
An exemption of 50% does not mean a 50% tax rate or that all income becomes tax-free. It generally means that only the qualifying portion specified by the regime is included in the relevant Italian taxable income calculation.
Eligibility is restricted. Requirements include rules concerning prior residence, a commitment to remain in Italy, where the work is performed and professional qualifications. The Italian tax agency identifies the newer regime as applying to qualifying workers transferring residence from the 2024 tax year onward.
The tax benefit should be considered alongside immigration permission, employment arrangements and U.S. tax obligations. Moving to Italy while working remotely for a U.S. company does not automatically mean you qualify.
Financial questions to address before moving to Italy
A cross-border review is most useful before you establish tax residence or make irreversible financial decisions. Ask your advisers to help you identify:
- When you are likely to become an Italian tax resident.
- Which of your income sources Italy and the United States may tax.
- Whether a treaty provision or foreign tax credit could provide relief.
- Whether your foreign accounts trigger FBAR or Form 8938 reporting.
- Whether you qualify for an Italian special regime and how to make the election.
- How your proposed municipality, pension and prior residence affect the 7% regime.
- How the timing of pension withdrawals, investment sales or a property purchase could affect your position.
Keep records of account balances, income, taxes paid and the dates you spend in each country. Those details can be important when preparing returns and assessing residence.
If you’re planning to move to Italy and want help understanding the financial questions to address before you go, contact Vantage Point Europe to discuss your plans and be connected with an appropriate independent tax professional