Tax Deduction | House renovation expenses

The Italian tax legislation provides certain tax breaks if you perform certain qualifying improvements to houses and other residential properties. This is an attempt by the legislator to help private individuals in improving their homes providing a tax break for this. Let’s find out how this system works.

House renovation - Who can benefit of it?

Before understanding the qualifying house renovations and how to claim such benefit, you must have clear in mind who can actually claim the tax break. There are few categories who can claim the house renovation tax break, and you don’t always need to own the property you intend to renovate:

  1. Natural person home owner;
  2. Individual claiming certain rights on the property such as usofrutto, uso, abitazione, o superficie;
  3. Property bare owner;
  4. Property lessee or tenant;
  5. Partnership partner.
From the above list, it appears that limited companies are excluded from this benefit. Furthermore, the following categories are included as long as they pay for the renovations:
  • Cohabiting family member;
  • Civil union partner;
  • Divorced or separated spouse living in the house.
It may be possible that the property is owned by two or more individuals, in this case the tax break is spread among the owners as long as they paid for the renovations.
 
Note that the beneficiary does not need to be a resident of Italy, nor to pay tax here; all that matters is to claim any right on any residential property located in Italy.
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House renovation - Which are the qualifying works?

The law establishes the qualifying works. Note that you cannot spend more than € 96,000 per house unit per work, and the tax break you can obtain is maximum € 48,000 per house unit. These are the most common qualifying works:

  • Balconies reinforcement;
  • Doors and windows replacement;
  • Architectural barriers removal;
  • Lift;
  • Central heating system and radiators replacement;
  • Electrical and hydraulic system replacement or improvement;
  • Intercom and video intercom installation;
  • CCTV installation;
  • External facade restoration;
  • Security door replacement;
  • Private road asphalting;
  • Wall painting.
The works can also be performed in a condominium, therefore the condominium administrator must put in place the required compliance to let the house owners benefit of the restoration credit.
Note that the € 96,000 cap competes with the Superbonus one.

House renovation - How to practically benefit of it?

In order to benefit of the House renovation tax break, you must put in place certain compliance. First of all, you might need to obtain a Comune permit to perform the renovation, and this starts the clock from when the invoices for the work can be paid. If you pay any invoice before the Comune releases the permit, you are disqualified from benefitting of it.

Once you obtain the permit, you must pay your invoices via a specific bank wire name Bonifico Ristrutturazioni Edilizie. This is mandatory to unlock the tax break, and it is not possible to pay via any other bank transfer or International bank wire. 

You can claim the tax break in your tax return in 10 equal installments over a 10 year period, which means that you can reduce your tax liability by a max of € 4,800 per tax year. If you don’t pay taxes to Italy or you don’t pay any IRPEF tax, your tax break is then wasted. Is there a way to convert it into hard cash?
The answer is positive. You can trade your credit directly to your contractor or you can sell it to an Italian bank, and in both cases you need to obtain an accountant’s Visto di conformità prior selling the credit.

Finally, you need to retain all of the above records for a period of 17 years (10 years of tax break + 7 years of tax office investigation period).

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