Are you a retired person from the US and you start to live in Italy? Are you an American retired and you spend some months of the year in Italy?Read this article and figure out if your US pension is taxable in Italy.
In case you are not an official resident
Therefore, if you are residing in Italy for 3 months or less, you are not deemed as a tax resident, thus you do not have to worry about paying taxes on your American pension in Italy.
Be aware that, according to the US state department, American citizens staying in Italy for more than 3 months per year, are considered tax resident overseas.
From a legal point of view, if you do not hold a EU passport and you plan to stay in Italy longer than 90 days, you are required to obtain a VISA to enter the country and then apply for a residence permit (or “permesso di soggiorno” in Italian). This procedure is administered by various entities, such as the immigration office, the Italian foreign embassy and, at some point, your local post office.If you are a pensioner and you want to move to Italy quickly, we advise to opt for the Elective Residence VISA. You can get more information in regards to our VISA program in our Immigration section.
They will give you an application kit to fill. After giving it back to your local post office, they will address you to a local police station to present your official demand which is scrutinized and, hopefully, approved.
Upon being granted your residence permit and owning or leasing a residential property, as an American citizen, you can finally apply for residency at your local Comune. You will then obtain your certificate of residency (“certificato di residenza”) from the local Vital Statistics Bureau (or Anagrafe) and you can enroll under the Universal Health Care system of Italy.
In case you are a resident in Italy
We can divide foreign pensions in two categories:
- Pensions for public functions paid by a foreign country (or by one of its political or administrative subdivisions), for services and work carried out on behalf of these entities;
- Private pensions paid by entities, institutions or insurance organizations of foreign countries appointed to handle the pension payments related to the termination of employment in the private sector
The first ones are normally ONLY taxable in the US, therefore no disclosure is required in the Italian tax return, whereas the second ones are taxable in Italy.
We recommend for more information, to check the double treaty agreements between the US and Italy.
If you find them hard to read or you do not know where to look, check out our video below about how to read them and how to find relevant information.
In case of Italian Nationality
What about other sources of income?
In case you have other sources of income, besides your pension, you will be subject to pay Italian taxes on these earnings, unless there is an exclusion as provided by the Double Tax Treaty.
For more info about this check out our article about income tax rate in Italy.
2019’s 7% Tax regime for pensioners
This tax regime lasts for 10 years, and it has been introduced as a response to many other Mediterranean countries launching similar programs, as well as repopulating Southern towns.
For more info check our video below.
Do you need help in filing your annual income statement? Write to us.
I’m interested in retiring to Italy. But I’m not sure that I want to live in one of the Southern towns nor Abruzzo. I see that a foreigner can qualify for a 7% tax rate on retirement income if they move to the Southern regions, or Abruzzo. My preference would be to live someplace else, such as Rome, or Florence, etc. Can I still qualify for the 7% rate if I have a residence in say Abruzzo, and also have a second residence in Rome? If not, can you tell me what the tax rate would be for foreign retirees living in Rome?
You may live somewhere else from Abruzzo, however the tax office can claw back your 7% regime in case of audit
Hello Nicolo – I plan on retiring in Italy. My retirement income will be 100% from a public (government) pension. If I decide to acquire Italian citizenship will I lose eligibility for the 7% flat tax rate should I choose to live in Sardegna? Also as a retiree whether American or Italian Citizen will I have to pay the 43% tax rate since my income will be greater than 75,000 Euro? . . . which is really high. Any advice would be appreciated thank you.
You won’t lose the 7% regime eligibility if you claim your Italian citizenship. Note that if you don’t claim your Italian citizenship, your public pension will not be taxable in Italy
So is it better not to claim citizenship if you are retiring w a government pension outside of Italy?
I am an American and Italian citizen that will have tax residency in Sicily and will elect the 7 percent flat tax. All of my income and assets are US sourced. It appears the US does not allow any foreign tax credits to avoid double taxation unless the income is foreign sourced. In effect, with only US income is it correct that we pay the full US tax bill without any offsets for the additional 7 percent paid to Italy? Thanks.
You can resource your income in form 1116 and claim the Italian taxes against the US ones
We live in Abruzzo and are US government retired. No assets in the US. The IRS takes taxes out on out government retirement before we get them. We file our taxes in the US as our income is below 30,000 US.
Is your pension related to government work?
I receive Veteran Disability pay that is tax exempt in the US. Will I have to pay taxes on that if I am an Italian resident?
Apparently yes. I have a state government tax exempt disability pension and my research shows Italy will want to tax it anyway.
I live in Abruzzo and I have retired from my job working for the
United States Postal Service. Does that qualify for the tax exemption here in Italy?
Yes as long as you are not an Italian citizen
I’m interested in the 7% program. To clarify, that’s only the national Italian income tax. I’d still have to pay regional/local income taxes, correct?
The 7% tax covers local taxes (regional and municipal) too
I’m 65 my wife 64.
We are both American and Italian citizens.
We lived in Usa for many years.
In 2020 we both lost our job due to covid 19.
We sold our house.
In May 2021 we moved to the south of Italy in a small town, because of the 7%.
We are now residents.
We will start getting social security money in 3 years.
We are now living on money from 401K to plus some dividends of money we invested from the selling of our house.
We found out contradicting informations.
Is the 401K considered a US pension that qualifies us for the 7%?
Or do we need to get money from the social security?
In case of the second one should we get back to Aire residency in order non to lose the privilege of the 7%?
401k is a qualifying pension income source
Nicolò,
Thanks for this great blog!
My wife and I are dual US/Italian citizens who have never lived in Italy. I will retire next year from my non-government, private job in the US and we plan to move to Italy to live. Our sole income will be from my 401(k) plan, and, in approximately five years, from US Social Security payments. 2 Questions: (1) assuming we do not take advantage of the 7% plan, will we be fully taxed in both countries on my pension income, with no credits going either way? (2) same question, utilizing the 7% plan.
Hi Did you find out the answer to your question regarding the IRA? We are retired, and live in Italy. We are residents of Italy (PDS). Our only source of income is SSA and IRAs. We have paid taxes in the USA to withdraw part of the IRA so that we can purchase an apartment in Italy – our only residence in both countries. Will we have to pay additional Italian taxes here on our retirement income? We went to an Italian accountant who didn’t know what an IRÀ was, and he didn’t have an answer. We now have an appointment with a second accountant.
Does government pension apply to only federal government or local as well? I will be retiring with a pension from a local government fire department I am assuming that is considered government pension in Italy since it does in US. And what of VA disability? That is a government agency as well so does that apply too?
The government pension tax exemption applies to federal government as well as local subdivisions/departments of the federal government. VA disability is normally disregarded
Sir, is there documentation that states that a US Govt Pension and VA Disabilities aren’t taxed? My wife and I are wanting to move to Italy and apply for the Elective Residence Visa and our income is solely from Govt Pension and VA Disability. Thank you for any advise.
yes! please check the Italy – US double tax treaty
Thank you very much.
Hello,
Can you please clarify what it means “VA disability is normally disregarded”? Does it mean that VA disability pension will be taxed in Italy as income?
Normally it isn’t, however there are various types of VA disability that may be taxed as well
My husband and I are retired teachers and considering moving to Italy. We receive pensions from teaching in 2 different states. We pay tax on them in the US. Would they be taxed in italy?
We will also be receiving Social Security payments as well which we will be taxed on by the US as well. Would our Social Security be taxed in Italy?
If you are US citizens only government pensions are not taxed; same as social security
Hello Dr. Bolla – so you are saying as an American citizen only and resident in Italy – I only pay taxes on social security to America?
Some people are saying I have to pay taxes on social security in Italy > regardless!
Please clarify as I am really confused now and thanks!
Sincerely
MJA
Depends on your citizenship, and if you worked for the government in the past
My husband and I purchased a house in Toscana and will want to move there permanently when we retire in 4 years. My income is mainly Social Security and a very small 401K and my husbands income will be from 401K, Social Security and a pension from a private employer. I am thinking of becoming a citizen through jure sanguinis. Would I be taxed higher on my social security and 401K if a citizen?
You would be taxed in Italy regardless of your citizenship. The only exclusion is if you were a public employee during your life, in that event a non Italian citizen does not pay any income tax on it, whilst Italian citizens do
How are Roth 401k and Roth IRA accounts treated ? These are not taxed in US because you contribute with after-tax funds. If you withdraw money from these accounts while you’re retired in Italy (Sicily, small village) will these funds be considered income you have to pay tax on in Italy ?
Yes, they are defined as financial income sources
May I please ask (for a US citizen who is a legal resident of Italy), in addition to the 401K and Roth IRA you mention above, is a traditional IRA account also defined as taxable “pension” income?
yes it is
Hi! What if I convert my traditional IRA to Roth IRA. Will my income from both be taxable in Italy?
yes, both of them
Hello, Nicolo,
I would appreciate your clarification about what is counted as “Pensions for public functions”. We are applying for ER want to move to Lombardy for our retirement this Summer. My biggest source of income will be the social security payment. I worked for 25 years at the NJ public state University and I am considered a State employee. Will my sociail security qualify as “Pensions for public functions”? or it will be taxed in Italy? If it qualifies, what documentation is needed to prove it?
Thank you in advance,
Brian
It does!
Hi Mr. Nicolò Bolla;
I am in the same situation as Brian as I have a DOD PENSION (pension for government work /public functions) but I receive (set up by the Federal Government) social security and not sure if it would be exempt from Italian taxes ? So just to clarify if I become a resident of Italy would my Social Security be taxed even though I was a former DOD GOVERNMENT WORKER? I’m still not sure? And thanks!
as long as you are not an Italian citizen
Hello Nicolo,
If I take an early distribution from a 401k pension (private) in the US and am a tax resident of Italy/dual citizen it would be taxed as regular income in Italy, correct?
Since the early withdrawal is subject to an additional 10% early withdrawal fee in the US (in addition to US income tax), does the double taxation treaty account for the early withdrawal fee or would it be in addition to the applicable income tax in Italy?
Thank you in advance.
your withdrawal is taxable, and you can deduct the extra 10% against your italian taxes
Hi Nicolo,
Are you familiar with Canadian RRSP’s and TFSA’s? Are they also considered pension income?
Grazie
they normally are
Hi!
My wife and are looking to retire to Italy fall of 2023. I have 32 years of Federal Government Work (6 years in the US Navy, 26 years at the Department of Transportation/FAA) could you tell me how my retirement would be taxed in Italy:
*Federal Pension
*Social Security Supplement (Special provision for Federal Air Traffic Controllers paid from date of retirement until they want to switch at age 62)
*Social Security from age 62 on (99% of the eligible social security payment is derived from a Federal job – excluding the few little jobs held as a teenager)
*TSP (Federal Employee 401k) both funded by Federal Government & myself through payroll deductions
*IRA’s – (if we don’t withdraw from them are they taxed and how)
We plan on living in the Southern area under the 7% tax scheme because we are worried about paying high taxes, so I’m really wondering if we could be living someplace else based on your response.
Thank you for your time.
If you are not an Italian citizen, your government pensions are non taxable as per the double tax treaty
So you’re saying that nothing at the moment, is considered taxable in Italy?
TSP?
FERS SS Supplement?
Then we wouldn’t be eligible for the 7% flat tax rate correct?
I was under the impression that if you resided in Italy for more than 180 circa days you had to pay Italian taxes…
depends on the double tax treaty too. It’s a very complicated matter
Nicolo,
Is it true that if I take advantage of the flat 7% tax I can’t claim a tax credit for the foreign taxes I would pay in Canada and USA for my pension income? I also get 25% withholding tax taken on our Mineral Rights cheques.
Thank you again
Nicole two clarifications please. Is the 43%tax rate on American residents on ALL qualifying income if it is over 75,000 euros or only on the portion over 75,000? Second do you file Italian taxes first and then get a credit for Italian taxes paid on your American taxes based on the double taxation rule? Thanks