Your Guide to US-Italy Expat Taxes

Italy is the land of art, history, and la dolce vita. It’s home to world-famous cuisine, Renaissance masterpieces, and breathtaking coastlines. From the rolling hills of Tuscany to the vibrant streets of Naples, every corner offers something special. But when tax season rolls around, things get tricky. As a US citizen, you still need to file with the IRS, and Italy has its own tax rules. Understanding how the two systems interact can save you money and stress. In this guide to US-Italy Expat Taxes, you’ll learn the key tax requirements, common pitfalls, and tips to make filing easier.

Do I Need to File US Taxes When I Live Abroad?

The Streamlined Procedure

US Tax Deadlines

Common Expat Tax Pitfalls

Italian Visas

Italian Taxes

US-Italy Tax Agreements

US Tax Benefits

Self Employment in Italy

Investing in Italian Property

Retiring in Italy as a US Expat

Get Help From The Professionals

Do I Need to File US Taxes When I Live Abroad?

Great question! But you probably won’t like the answer.

As a US citizen or Green Card holder, you must file a US tax return every year, no matter where you live. The US taxes based on citizenship, not residency, so living abroad doesn’t exempt you from filing. Whether you’re employed, remote working, or even retired abroad, most people have to file their US taxes.

In 2025, you’ll need to file your 2024 US taxes if you are:

Filing Status	Income Threshold
Single	$14,600
Married Filing Jointly	$29,200
Married Filing Separately	$5
Self-Employed	$400

If you’re not one of the lucky few who meet the exclusion criteria, don’t worry. Filing your US expat taxes from Italy doesn’t have to be complicated, and our guide will tell you all you need to know.

First up: The Streamlined Procedure

If you weren’t aware that you need to file your US taxes while living abroad, the Streamlined Procedure is the solution for you.

The Streamlined Procedure helps US expats catch up on missed tax filings without facing penalties. You’ll need a reason for not filing (not knowing you had to file counts!), and you’ll be able to catch-up by filing just three years of tax returns and six years of FBARs. The best part is that you can use this program to become compliant while avoiding steep fines. It’s a great option if you unknowingly missed your US tax obligations while living abroad.

US Tax Deadlines

Standard Filing Deadline	April 15th
Automatic Extension for Expats	June 16th
Deadline for Expats Filing an Extension (file by June 15th)	October 15th
FBAR Deadline for Expats	October 15th
Deadline for Expats if you Filed a Second Extension	December 15th

Common US-Italy Expat Tax Pitfalls

Filing US expat taxes while living in Italy can be tricky, and you’ll want to avoid mistakes that lead to penalties. Here are some common pitfalls to watch out for:

1. Forgetting the FBAR (Foreign Bank Account Report). If you have more than $10,000 combined among your foreign accounts at any time during the year, you must report them to the US Treasury. Many expats overlook this requirement, leading to steep fines.
2. Overlooking FATCA (Foreign Account Tax Compliance Act). FATCA requires US expats to report all foreign accounts and assets to the IRS if your maximum combined balance is over a certain threshold (starting at $200,000 for single filers). Many expats don’t realize they must report everything from bank accounts to foreign investments, risking penalties if they miss this requirement.
3. Not Reporting Foreign Investments. If you own Italian mutual funds, pensions, or certain life insurance policies, you may need to file Form 8621 (PFIC reporting). Failing to report these can trigger high tax rates and IRS scrutiny.
4. Ignoring Italian Tax Obligations. The US and Italy have a tax treaty, but you still must file taxes in both countries. Many expats assume they only need to file in one, leading to unexpected tax bills or penalties.
5. Missing the Streamlined Procedure for Late Filers. If you haven’t filed US taxes for years, you might qualify for the IRS Streamlined Foreign Offshore Program, which helps expats catch up without penalties. Missing this opportunity can make compliance more expensive later.

Now you know what to avoid in your US-Italy Expat Taxes, let’s break down the key info to keep you on track with legal and tax compliance in Italy and the US.

Italian Visas

If you’re visiting Italy for under 90 days, you don’t need any visa, though your passport needs to be valid for at least 3 months validity beyond your planned date of departure from the Schengen area. From late 2025, you’ll need to apply for the ETIAS Italy before traveling to the country.

For longer-term stays, Italy offers several visa options for US citizens, depending on your reason for moving. The Elective Residency Visa is popular for retirees and those with independent income, allowing long-term stays without working. If you plan to work, you’ll need a Work Visa. Your employer must sponsor you, and Italy’s annual work permit quotas make this process competitive.

Visa Requirements & Residency

Each visa has specific requirements, but most need proof of financial stability, health insurance, and a place to stay in Italy. The Elective Residency Visa requires proof of passive income, such as pensions or investments, with a minimum threshold. Work visas require a valid job offer and approval from the Italian immigration system. You must apply at an Italian consulate in the US before moving and provide extensive documentation.

After arriving in Italy, you must apply for a Permesso di Soggiorno (residence permit) within eight days. This permit allows you to stay legally and must be renewed periodically. Some long-term visa holders can eventually apply for permanent residency or even Italian citizenship after meeting residency requirements.

See the US Embassy in Italy to secure your visa.

Italian Taxes

Italy’s national income tax is progressive, ranging from 23% to 43%, depending on earnings. There is also a regional income tax of between 1.23% to 3.33%, and municipal tax of 0% to 0.9%, depending on where you live. (Rates as at 2024).

Tax resident individuals are taxed on their worldwide income. You are considered a resident if you spend more than 183 days per year in the country or if your main economic interests (such as employment or business activities) are in Italy. Italy offers several tax deductions and credits to residents. You can deduct expenses related to healthcare, education, and housing, among others.

Non-tax resident individuals are only subject to personal income tax on income generated within Italy, such as employment income earned from work performed in Italy.

Special Tax Regimes

The Tax Regime for Neo-Domiciled Individuals in Italy offers significant tax benefits to new residents, particularly for high-net-worth individuals and those who have not been tax residents in Italy for at least 9 of the previous 10 years. Under this regime, eligible expats can pay a flat annual tax of €200,000 (2025) on their foreign income, regardless of the amount earned outside Italy.

The Flat Tax Regime for Non-Italian Retirees is designed for foreign retirees who move to certain regions in southern Italy. Eligible retirees can benefit from a 7% flat tax on all foreign income, including pensions, rental income, and investments for 10 years. To qualify, you must have lived outside Italy for the past five years and establish residency in a town with fewer than 20,000 residents in specific regions like Sicily, Calabria, or Puglia. This regime can be attractive for US expats looking to retire in Italy while significantly lowering their tax burden.

Filing Deadlines and Penalties

The deadline for filing income taxes in Italy is typically by the end of September for the previous calendar year. If you fail to file on time, penalties can range from fines to interest on unpaid taxes. Additionally, Italy has a Voluntary Disclosure Program that allows individuals to report undisclosed foreign income or assets, reducing potential penalties. This program can be helpful for expats who have not fully complied with their tax obligations in the past.

As Italian taxes can be complex and regulations are subject to change, we always recommend speaking to a local tax advisor for guidance on your tax situation.

US-Italy Tax Agreements

The US-Italy Tax Treaty is designed to avoid double taxation, which can be a concern for individuals and businesses with ties to both countries. The treaty determines which country has the right to tax various types of income, including wages, pensions, and business profits. This helps simplify tax obligations for those who live or do business in both countries.

For individuals, the treaty ensures that you won’t be taxed twice on the same income. The treaty also outlines special provisions for pensions, social security, and other sources of income, which helps expats avoid confusion and ensures they only pay taxes in the appropriate country.

For businesses, the treaty provides important relief by defining how corporate income is taxed. US businesses operating in Italy, or Italian businesses in the US, can benefit from reduced withholding tax rates on dividends, interest, and royalties. This treaty also helps avoid dual taxation for companies that are involved in cross-border activities, encouraging smoother operations between the two countries.

Remember that as a US citizen, you cannot claim the majority of the benefits outlined in the tax treaty due to the Savings Clause. This is why it’s important to fully understand how to use the tax treaties as US citizens can only benefit from some provisions.

Social Security

The US-Italy Totalization Agreement helps you avoid paying social security taxes in both the US and Italy on the same income. It determines which country’s social security system you should contribute to based on where you live and work. It allows you to combine your work history from both the US and Italy to qualify for benefits, ensuring you don’t lose eligibility for retirement, disability, or other social security benefits due to time spent working in both countries. Italy’s Totalization Treaty is unique, as it states that US citizens, who are not Dual US/Italian Citizens actually have to pay US self-employment tax, not Italian self-employment taxes.

US Tax Benefits for Expats in Italy

Foreign Earned Income Exclusion

The Foreign Earned Income Exclusion (FEIE) allows US expats to exclude $126,500 of foreign-earned income from US taxation. Earned income includes salaries, wages and self-employment income. This amount is adjusted yearly for inflation. To qualify, you have to pass either the Physical Presence Test (spending at least 330 full days outside the US in a 12-month period) or the Bona Fide Residence Test (proving long-term residency in another country). However, the FEIE does not cover passive income like rental earnings, dividends, or pensions.

If you earn below the exclusion threshold and pay little to no Italian tax, the FEIE can be a great way to reduce or eliminate your US tax liability. This is especially useful if you work remotely for a US company, are self-employed, or earn income in Italy but fall into a low Italian tax bracket. Since Italy has progressive tax rates, some lower-income earners may benefit from using the FEIE to avoid paying additional US taxes.

Foreign Tax Credit

The Foreign Tax Credit (FTC) helps US expats avoid double taxation by allowing them to offset US tax liability with foreign taxes paid. Unlike the FEIE, which excludes income, the FTC directly reduces your US tax bill based on the taxes you pay in Italy. Since Italy’s income tax rates are generally higher than US rates, most expats find the FTC more beneficial.

To use the FTC, you must pay or accrue foreign taxes on income that the US also taxes. You report these taxes on IRS Form 1116 and can carry forward unused credits to future years. Useful if your Italian tax burden is higher than your US liability, as the excess credit can offset future US taxes.

When to Use FEIE vs. FTC

• Use FEIE if you earn below the exclusion limit and pay little to no Italian tax. This works well for remote workers or self-employed expats with low income.
• Use FTC if you pay high Italian taxes, as it allows you to avoid double taxation more effectively.
• Sometimes both work together if you have income above the FEIE limit. You can use the FEIE first, then apply the FTC on the remaining taxable income.

See our FTC / FEIE Calculator for a personalized recommendation from our Tax Professionals on the best strategy for you.

Foreign Housing Exclusion

The Foreign Housing Exclusion allows US expats in Italy to deduct certain housing expenses from their taxable income, reducing their US tax liability. This exclusion is available if you qualify for the Foreign Earned Income Exclusion (FEIE), and it helps offset the higher cost of living in foreign countries like Italy. Eligible expenses that can be excluded include rent, utilities, property insurance, and housing repairs.

In Italy, housing costs can be significantly higher in cities like Rome or Milan, making this exclusion particularly beneficial. Only the portion of your housing expenses that exceeds the base amount set by the IRS is eligible for exclusion. Additionally, there are limits on how much you can exclude, depending on the area where you live.

To claim the exclusion, file Form 2555 alongside your Form 1040 when filing your US taxes. Be sure to keep detailed records of your housing expenses to substantiate your claim.

Benefits for Families

The Child Tax Credit (CTC) is a US tax benefit to help families with children under 17. For US expats living in Italy, the credit works the same way as for those living in the US. The CTC can reduce your tax liability up to $2,000 per qualifying dependent. Up to $1,700 is refundable (meaning you can receive it as a refund even if you don’t owe taxes). To qualify for the full refundable amount, your income must be below a certain threshold. If you’re a single filer, you’ll be eligible for the full refund if your income is below $200,000. For joint filers, the income limit is $400,000. You won’t qualify for the refundable portion if you claim the Foreign Earned Income Exclusion (FEIE).

All of these credits are supported by our expat tax software. Simply complete our questionnaire, and MyExpatTaxes will ensure you take maximum advantage of benefits available to you.

Self Employment in Italy

Registering As Self Employed in Italy

You’ll need to register with the Italian tax office (Agenzia delle Entrate) to receive a VAT number if your business activities require it, such as providing services or selling goods. Self-employed individuals in Italy are subject to Italy’s progressive income tax rates depending on your income level. You’ll also pay social security contributions to the INPS, which funds your pension and healthcare benefits.

While Italy offers a favorable environment for entrepreneurs, it’s important to be aware of Italy’s business regulations. Self-employed individuals often face strict invoicing requirements and need to maintain detailed financial records for tax purposes.

Reporting Self-Employment on Your US Tax Return

As a US expat working self-employed in Italy, you’re required to pay US self-employment taxes of 15.3% on your income if you earn over $400.

Investing in Italian Property as a US Expat

Investing in Italian property as a US expat can be an exciting opportunity, offering everything from charming countryside villas to modern city apartments. Italy’s property market is generally stable, with some areas offering attractive prices, especially in smaller towns or less tourist-heavy regions. Before making an investment, be sure to understand the legal requirements, including the need for a codice fiscale (tax code) and potential additional taxes on foreign property ownership.

Italy also has some specific rules for expats buying property, such as restrictions in certain regions and areas near national borders. As a US expat, you’ll need to consider property taxes, such as the annual IMU (municipal property tax) and other local taxes. However, the relaxed lifestyle and stunning views can make it a worthwhile investment.

If you plan to rent out your property, it will be subject to taxation, but there are various tax benefits depending on the type of property and rental contract.

See the Agenzia delle Entrate (Italian Revenue Agency) for further info on property-related taxes.

Key Tax Incentives for Foreign Property Buyers

Italy is rolling out the red carpet for foreign property buyers with tax breaks that make investing even more attractive. If you plan to move to Italy, you may qualify for reduced property taxes when purchasing your primary residence. Renovating a historic home? There are tax incentives to help offset the costs, making it easier to restore Italy’s charming old buildings. Meanwhile, property buyers in specific rural regions may find additional benefits, as some towns offer discounted homes to encourage repopulation.

Beyond financial advantages, these incentives support local economies and breathe new life into less-populated areas. So property investment is less costly for foreign buyers looking for a second home, retirement spot, or a fresh start. Whether you’re dreaming of a countryside villa, a seaside escape, or a city apartment, these tax benefits can make your Italian property purchase even sweeter.

Retiring in Italy as an Expat

Fancy sipping espresso in a bustling Roman piazza or enjoying gelato on a sunny day in Florence, embracing Italy’s charm. Whether on the Mediterranean coast or in a quaint village, retiring in Italy promises beauty, indulgence, and culture.

Taxes on Pensions

For retirees, the US-Italy Tax Treaty makes life easier by preventing double taxation on social security-type pensions, which are taxed in the state of residency when paid out. Plus, Italy offers a flat tax rate on foreign pensions for retirees moving to certain regions, which can be a great way to save on taxes.

Investing in IRAs While Living Overseas

As a US expat living in Italy, you can still contribute to your IRA, but there are some limits based on your income and tax filing status. You can contribute up to $7,000 (or $8,000 if you’re 50 or older), just like in the US. Keep in mind that you need to have taxable compensation on your US return, and the foreign earned income exclusion may affect your contribution limit.

Even though you’re living in Italy, as a US citizen or Green Card holder your IRA is still subject to US tax rules. You’ll continue to benefit from tax-deferred growth or tax-free withdrawals (for Roth IRAs), but you’ll need to follow the IRS guidelines to avoid any issues.

MyExpatPlanning can help you understanding how your US and local retirement funds are taxed on your US tax return.

Get Help From the Professionals on Your US-Italy Expat Taxes

MyExpatTaxes is expat tax software designed by expats. We understand the challenges of not only moving country but also getting to grips with a foreign tax system! Let us take away the stress with our simple to use, affordable software. Relax knowing you’re not paying a cent more in taxes than is absolutely necessary.