Italian taxes for Americans: how the Agenzia delle Entrate and the IRS fit together

Live in Rome and you'll answer to two tax offices: Italy's Agenzia delle Entrate and the IRS. Italian rates are high enough that the US bill on a salary often shrinks to zero, but you still file both returns.

The short version

• Italy taxes you on worldwide income once you're a tax resident: for more than 183 days of the year (fractions of days count), you're physically in Italy, live here habitually, or have your main personal and family ties here [1].
• IRPEF, the national income tax, runs 23%, 33% and 43% for 2026, plus regional and municipal surcharges [2].
• Wealthy newcomers can pay a lump sum of EUR 300,000 (about USD 334,900) a year on their foreign income if they move from January 1, 2026; earlier movers locked in lower amounts [2].
• The US–Italy tax treaty in force today is the 1999 treaty, which replaced a 1984 one [3]. The Social Security agreement has been in force since November 1, 1978 [4].
• On your US return you'll usually claim the foreign tax credit or the foreign earned income exclusion: up to USD 130,000 for 2025 and USD 132,900 for 2026 [5].

USD conversions use the Federal Reserve H.10 rate of October 30, 2026 (EUR 1 = USD 1.1163).

When Italy considers you a tax resident

Italy rewrote its residency rules from 2024. Under the current law, you're an Italian tax resident if, for most of the tax year (more than 183 days, counting fractions of days), at least one of these applies [1]:

1. You're physically present in Italy. This is the new test, and it's the one that catches people. Trips home for Thanksgiving don't reset the count.
2. You have your residence here, meaning your habitual home.
3. You have your domicile here, meaning the main center of your personal and family relationships. Family ties now outweigh economic ones [1].

There's also a presumption: if you're registered at the anagrafe (Rome's resident registry) for most of the year, Italy presumes you're a tax resident unless you prove otherwise [1]. Since most Americans on a long-stay visa register their residence, assume Italy will see you as a resident. Residents are taxed on the full calendar year [1].

If you're also a resident somewhere else under that country's rules, the treaty's tie-breaker rules can settle it. A US expat tax preparer can check your situation.

IRPEF: the rates

The national scale for 2026 is simple [2]:

Like IRS brackets, these are marginal rates. On top, you pay a regional surcharge, generally 1.23% to 3.33%, and a municipal surcharge, generally up to 0.9%, depending on where you live [2]. Lazio and Rome set their own rates, so check your figure.

A few other rates worth knowing:

• Investment gains: capital gains on financial assets are generally taxed at a 26% substitute tax [6].
• Foreign assets: Italy also taxes foreign bank and investment accounts and foreign real estate through separate wealth taxes, IVAFE and IVIE, and wants them reported on form RW. That includes your US accounts. See IVAFE and IVIE: Italy's taxes on foreign assets.

Special regimes for newcomers

Italy courts new residents with a few special deals. Each has strict conditions, and none can be stacked.

The lump-sum regime for new residents

This is Italy's version of a non-dom regime: instead of tax on your foreign income, you pay a fixed annual amount. Italian-source income is still taxed normally. The price has gone up fast [2]:

It can't be combined with the inbound workers regime below [2]. And here's the American catch: the IRS doesn't care. You still owe US tax on your worldwide income, and a lump sum isn't tied to any particular income, so claiming a US foreign tax credit for it can be tricky. Get advice before you elect it.

The inbound workers (impatriati) regime

If you move to Italy to work and meet the conditions, only 50% of your qualifying work income counts toward taxable income, up to EUR 600,000 (about USD 669,800) a year. That drops to 40% taxable if you move with a minor child or have one during the regime [6]. You must [6]:

• not have been an Italian tax resident in the three tax years before the move (longer if you return to the same employer or group)
• meet high qualification or specialization requirements
• commit to staying an Italian tax resident for at least four tax years

It runs for the year you become resident and the following four years [6].

The 7% pensioner regime: not for Rome

Retirees with foreign pensions can pay 7% on foreign income for up to ten years, but only if they move to a qualifying small town (under 20,000 residents) in the south, such as in Sicily, Calabria, Sardinia, Campania or Puglia [2]. Rome isn't eligible.

Filing your Italian return

Italy's tax year is the calendar year [7]. You'll file one of two returns:

1. Modello 730, the simplified return for most employees and pensioners with an Italian withholding agent, due September 30 [7].
2. Modello Redditi PF, for everyone else (including most people with foreign income or accounts), due October 31 [7].

If you owe tax, the balance for the year is due June 30 of the following year, with two advance payments for the current year on June 30 and November 30 [7]. Italy gives its own credit for foreign taxes, with limits, which matters if you have US-source income taxed in the States first.

The Agenzia delle Entrate's own pages didn't load when we checked, so we've relied on PwC's summaries for Italian rules.

Your US return from Rome

Uncle Sam taxes citizens on worldwide income wherever they live, so Form 1040 still comes due every year.

• Deadlines: living abroad on April 15 gets you an automatic extension to June 15, and Form 4868 pushes it to October 15. Interest on unpaid tax still runs from April 15 [8].
• Foreign tax credit (Form 1116): most Americans with an Italian salary claim a credit for IRPEF paid. Since Italian rates often run above US rates, it usually wipes out US tax on that income.
• Foreign earned income exclusion (Form 2555): up to USD 130,000 for 2025 and USD 132,900 for 2026 [5]. It only covers earned income, so it does little for retirees on an elective residence visa living off pensions and dividends.
• FBAR: if your foreign accounts total more than USD 10,000 at any time in the year, file FinCEN Form 114, due April 15 with an automatic extension to October 15 [9].
• Form 8938: for Americans living abroad, the threshold is USD 200,000 at year-end or USD 300,000 at any time (single), and USD 400,000 or USD 600,000 for joint filers [9].

Watch out for Italian investment funds, which the IRS treats as PFICs. See PFICs: why foreign funds hurt Americans.

The treaty and the Social Security agreement

The IRS lists a 1984 income tax treaty and the 1999 treaty that replaced it, along with their technical explanations [3]. Like every US treaty, it has a saving clause, so the US can still tax its own citizens almost as if the treaty didn't exist. For Americans in Rome, it mostly matters for which country gets first dibs on pensions and US investment income, and for how you figure the foreign tax credit. See Tax treaties and totalization agreements.

The US–Italy Social Security agreement took effect on November 1, 1978 [4]:

• Sent by a US employer on a temporary assignment? US agreements generally keep you in your home system for assignments expected to last about five years or less [4]. Your employer asks for a certificate of coverage.
• Hired locally in Rome? You pay into INPS, Italy's social security agency, not the US system.
• Self-employed? The SSA says US nationals self-employed in both countries are assigned US coverage, and should attach their certificate of coverage to their US return each year [10].

Credits in both countries can be combined to qualify for a pension. See Social Security abroad.

Want to hear how other Americans handle two returns? Ask in our community group for Americans in Italy.

Sources

1. PwC Worldwide Tax Summaries: Italy, residence (reviewed July 23, 2026)
2. PwC Worldwide Tax Summaries: Italy, taxes on personal income (reviewed July 23, 2026)
3. IRS: Italy tax treaty documents
4. SSA: US international Social Security agreements
5. IRS: Figuring the foreign earned income exclusion
6. PwC Worldwide Tax Summaries: Italy, income determination
7. PwC Worldwide Tax Summaries: Italy, tax administration
8. IRS: US citizens and resident aliens abroad
9. IRS: Comparison of Form 8938 and FBAR requirements
10. SSA: Agreement between the United States and Italy

Keep reading

• IVAFE and IVIE: Italy's taxes on foreign assets
• Codice fiscale: Italy's tax code
• Foreign earned income exclusion vs foreign tax credit
• FBAR: reporting your foreign bank accounts