Americans moving to Italy: tax, reporting and what the treaty actually does. We prepare the Italian side and coordinate it with your US accountant, in the order the treaty requires.
Moving to Italy does not end your relationship with the IRS. The United States taxes its citizens on worldwide income wherever they live, so from the day you become an Italian resident you are filing in two countries at once, and the real question is no longer whether you are taxed twice, but in which order, and who gives credit to whom.
Get that order right and the outcome is often better than clients expect: some American income is taxed mainly in Italy, at rates that can be very low. Get it wrong and you pay in full in both places.
Italy looks at whether, for more than half the tax year (183 days, or 184 in a leap year), you were registered with the Anagrafe, had your domicile or habitual abode in Italy, or were physically present here. Any one of them is enough. Since 2024, domicile means the place where your personal and family relationships principally develop. We explain the four residence tests in a dedicated guide.
Once resident, you are taxed in Italy on your worldwide income, and the Italian tax year is the calendar year, with no split year. Arriving in June has very different consequences from arriving in August, and the timing is entirely within your control.
Most explanations describe the ordinary rule: Italy taxes your worldwide income and gives credit for the US tax. That rule exists, but it does not apply to US citizens. The treaty says so expressly, and the mechanism that applies instead runs in two stages, in the opposite direction.
The practical consequences: your Italian return is the first one that has to be right, because the US return is built on top of it. The two filings cannot be prepared by two advisors who never speak, and the timing has to be managed, because the two countries run on different calendars.
The FEIE lets qualifying Americans abroad exclude a band of foreign earned income from US tax. It is the first thing most people have heard of, and in Italy it is rarely the right tool.
For most clients the answer is the credit, not the exclusion. But it is a modelling question, best settled before the first return rather than after the fifth, also because revoking the exclusion later has its own consequences.
This is where Americans in Italy do genuinely well. Under the treaty, private pensions from past employment, including IRAs and individual retirement plans, and Social Security are taxable in the State where you live: once you are Italian resident, Italy has the taxing right. As a citizen, you still report them on your US return under the treaty's saving clause, with credit for the Italian tax.
That opens a door. Because the pension is foreign-source income in Italy, a qualifying retiree can elect the 7% regime for foreign pensioners: a flat 7% on all foreign income for ten years, for those who move to a qualifying town. US Social Security and IRA distributions are exactly the income it was built for. With such a low Italian tax, part of the US tax may remain due: we model both sides together.
For the many Americans who come to Italy holding, or in the process of claiming, Italian citizenship by descent, this is the strongest argument we know for confirming your citizenship position before you file.
Separate from the tax treaty, Italy and the United States have a totalization agreement on social security contributions. It assigns coverage to one system rather than both: an employee sent to Italy by a US employer can stay in the US system for a defined period, with a certificate of coverage from the US Social Security Administration. It also lets you aggregate contribution periods in the two countries, so years in Italy do not vanish from your record.
Two warnings. The certificate is not automatic, and is far easier to get before the assignment starts. And the self-employed position is more delicate: a US freelancer who becomes Italian resident and keeps invoicing American clients needs the coverage question answered explicitly, not assumed.
You will now report your assets to two governments, on different forms with different thresholds. On the US side, FBAR and FATCA continue, and your new Italian accounts become foreign accounts. On the Italian side, the RW section of the return requires you to report every foreign asset held at any point in the year: US bank and brokerage accounts, retirement plans, real estate, shareholdings, crypto, policies with a surrender value, whether or not they produced income. Penalties run from 3% to 15% of the undeclared value, and from 6% to 30% for assets in privileged-tax jurisdictions.
Reporting is not the same as being taxed. Italy charges IVIE on foreign real estate and IVAFE on foreign financial products, and the distinction matters for Americans.
If you keep US property, it becomes subject to IVIE at 1.06% once you are Italian resident. Two features soften that. The property tax you pay in the US is creditable against IVIE, so for many owners the net Italian charge is small or nil. And the base for property outside the EU is acquisition cost or market value: for a house bought years ago, cost is often far below today's value. Rental income is taxable in Italy too, with relief for the US tax: one more reason the two returns have to be prepared together.
A non-US pooled fund, such as an Italian or Luxembourg UCITS, is generally a passive foreign investment company for US purposes, taxed punitively and reported on a notoriously complex form. The advice is simple and unwelcome: do not buy European funds while you hold a US passport, however sensible your Italian banker makes them sound.
The mirror problem is that US-domiciled ETFs are increasingly hard to buy from an EU platform. The result is a narrow corridor, and portfolios often need restructuring before you arrive, not after.
Several states, California being the notorious example, apply their own residence and domicile tests, and moving abroad does not by itself sever the connection. Property kept, voter registration, a driver's licence, a mailing address at a relative's house: each is evidence, and states have assessed years later. Leaving your state properly is a separate exercise, worth doing deliberately in the year of the move.
Italy and the United States have an estate tax convention, which is unusual and useful, but it does not make the two systems align. Italian succession tax is charged at low rates with generous allowances between close relatives; US estate tax is charged at high rates above a large exemption. A revocable living trust, the backbone of American estate planning, has no Italian equivalent and may be treated as transparent, with the assets attributed to you for Italian income tax and reporting. We review these structures before the move, alongside your US counsel.
Italy offers several incentive regimes to new residents. The 7% regime for foreign pensioners and the inbound workers regime both work well for Americans in the right circumstances, and freelancers may look at the forfettario. For a US citizen, however, the value of any Italian regime depends on how it interacts with your continuing US filing, and that varies with your income, citizenship status and assets. It is a conversation to have before you elect anything, not after: the most common reason Americans come to us having already moved.
Non-EU nationals also need the right visa: retirees usually the Elective Residency Visa, investors the Golden Visa. We coordinate visa, residence and tax so the whole move fits together.
Most Americans in Italy end up with two advisors who have never spoken to each other, and a set of assumptions imported from an expat forum. Avv. Marco Mesina, a member of the Milan Bar (Ordine degli Avvocati di Milano) and formerly of Deloitte and Withers, handles the Italian half properly and coordinates it with your US accountant in the order the treaty actually requires: the Italian position first, the US return built on top of it, and the reporting on both sides reconciled rather than duplicated.
Yes. The United States taxes citizens on worldwide income wherever they live. For US citizens, Italy taxes first with a limited credit, and the United States gives the final credit for the Italian tax.
Under the treaty, Social Security is taxable in the State where you live, so Italy. As a US citizen you still report it to the US with credit for the Italian tax, unless you are also an Italian citizen, in which case it is excluded from US tax.
Yes, where the conditions are met: US pensions and Social Security are foreign-source income in Italy, and the regime charges a flat 7% on all foreign income for ten years in a qualifying town. Model the US side too.
Usually the credit. The exclusion covers earned income only, does nothing about Italian tax and forfeits credits you could carry forward. It is worth modelling before the first return.
Not necessarily. The totalization agreement assigns you to one system, and an employee sent to Italy by a US employer can stay in the US system with a certificate of coverage obtained in advance.
It is reported in the RW section, but it is not subject to IVAFE. Ordinary brokerage accounts are subject to IVAFE at 0.2%. Hybrid and insurance-wrapped products are assessed individually.
It becomes subject to IVIE at 1.06%, on acquisition cost or market value, but the US property tax you pay is creditable against it. For many owners the net Italian charge is modest.
Avv. Marco Mesina
Founder, Move to Dolce Vita · Avvocato, Milan Bar (Ordine degli Avvocati di Milano)
Marco is an Italian tax lawyer who advises individuals and families relocating to Italy on tax regimes, residency, citizenship, real estate and succession planning. Before founding Move to Dolce Vita he worked at Watson Farley & Williams, Withers and Deloitte in Milan.