US Expat Tax Services in Italy
US citizens living in Italy face some of the most complex cross-border tax situations in the world.
From the US-Italy tax treaty to FBAR and wealth taxes, our specialists know exactly what you owe and what you don’t.
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American based in Italy
Erica is an American-Italian dual citizen, wife, mom of three, and Neonatal Nurse Practitioner who moved her family to Tuscany in 2025.
She and her husband wanted their kids to grow up bilingual, immersed in a new culture, and experiencing more of the world while they were still young.
What they didn’t want was their US tax obligations getting in the way of that life. Expat Tax Online made sure they didn’t.
Table of Contents
US expat tax in Italy: The complete filing guide for Americans abroad in 2026
If you’re a US citizen living in Italy, you may need to file tax returns in both countries. This guide explains Italian tax residency, US filing requirements, the US-Italy tax treaty, foreign tax credits, wealth taxes, FBAR, retirement planning, investments, and other key tax rules to help you stay compliant while reducing the risk of double taxation.
Quick answers for Americans moving to Italy
| Question | Short answer |
|---|---|
| Do I still file a US tax return while living in Italy? | Yes. US citizens generally continue filing annual federal tax returns regardless of where they live, if they meet the IRS filing thresholds. |
| Will I also file taxes in Italy? | Usually, if you become an Italian tax resident under Italian tax law. |
| Will I pay tax twice? | Not necessarily. Foreign tax credits, treaty provisions, and other tax rules are designed to reduce or eliminate double taxation in many situations. |
| Does Italy tax worldwide income? | Generally yes, once you become an Italian tax resident. |
| Do I need to report my Italian bank accounts to the US? | Possibly. FBAR and Form 8938 reporting may apply depending on your financial accounts and assets. |
| Can I keep my US bank account? | Generally yes, although some financial institutions have policies that affect customers living overseas. |
| Can I continue investing through my US brokerage account? | Sometimes. Many Americans can keep existing accounts, but brokerage policies and international tax rules deserve careful review. |
| Does Italy have wealth taxes? | Yes. Italian tax residents may be subject to IVAFE on certain foreign financial assets and IVIE on foreign real estate. |
| Which country taxes my salary? | It depends on where you work, your tax residency, and the applicable treaty rules. |
| Should I work with both a US and an Italian tax adviser? | Many long-term expats benefit from coordinated advice, especially if they own investments, businesses, or significant assets. |
Do Americans living in Italy have to pay taxes in both countries?
Yes. US citizens generally continue filing US tax returns while Italian tax residents are generally taxed by Italy on their worldwide income. However, various tax rules often prevent the same income from being taxed twice.
One of the biggest misconceptions among new expats is that moving overseas automatically ends their US tax obligations. It doesn’t. The US is one of the few countries that taxes its citizens regardless of where they live.
That means many Americans living in Italy have tax filing obligations in both countries. Fortunately, paying tax twice on the same income is often avoided through a combination of tax credits, treaty provisions, and other relief measures.
US vs. Italy tax obligations
| Topic | United States | Italy |
| Who is taxed? | US citizens and residents | Italian tax residents |
| Taxes on worldwide income? | Yes | Generally yes |
| Annual income tax return | Generally required | Generally required if filing thresholds are met |
| Relief from double taxation | Foreign Tax Credit, treaty provisions, and other rules | Foreign tax credit rules and treaty provisions |
| Foreign financial reporting | FBAR and, where applicable, Form 8938 | Separate Italian reporting rules may apply depending on your circumstances |
It’s also worth remembering that filing a return and paying tax aren’t always the same thing. Many Americans in Italy continue filing US tax returns every year but owe little or no US income tax because they’ve already paid tax in Italy or qualify for other relief provisions.
When do I become an Italian tax resident?
You generally become an Italian tax resident if, for most of the tax year, you are registered as resident in Italy, have your residence in Italy, have your domicile in Italy, or are physically present in Italy.
In many cases, you’ll be treated as an Italian tax resident if one or more of the following applies for most of the tax year:
- You are registered as a resident in the Italian civil registry (Anagrafe).
- Your habitual residence is in Italy.
- You are physically present in Italy for most of the tax year.
- Italy becomes the center of your personal and economic interests (often referred to as your “center of vital interests”).
Because these rules can overlap, residency isn’t always determined by simply counting the number of days you spend in Italy.
For example:
A US citizen who moves to Italy for work, registers as a resident, and lives there for most of the year will generally be considered an Italian tax resident. They will typically need to file tax returns in both the US and Italy, reporting worldwide income. If both countries treat you as a resident, the tax treaty may help decide your status in some cases, but you will usually still need to file a US tax return.
What income is taxable once I live in Italy?
Once you become an Italian tax resident, Italy generally taxes your worldwide income. As a US citizen, you’ll also continue reporting your worldwide income to the IRS, although each country may tax different types of income differently.
One of the first adjustments many Americans make after moving to Italy is realizing that not all income is taxed the same way. While both countries generally require you to report worldwide income, Italy classifies income into different categories, each with its own tax rules. Some income is taxed under Italy’s progressive personal income tax system (IRPEF), while other types, such as certain investment income, may be subject to separate flat tax rates.
The table below shows how the most common sources of income are generally treated.
Common income sources for Americans living in Italy
| Income type | Generally taxable in Italy? | Generally reportable on your US tax return? |
| Employment income | Yes | Yes |
| Self-employment income | Yes | Yes |
| Rental income from US property | Generally yes | Yes |
| Rental income from Italian property | Yes | Yes |
| Interest income | Generally yes | Yes |
| Dividend income | Generally yes | Yes |
| Capital gains | Generally yes | Yes |
| Pension income | Depends on the type of pension, source country, and treaty rules | Generally yes |
For example, imagine you move to Rome but keep your US brokerage account. If that account pays dividends or you sell investments for a gain, those transactions may continue to appear on your US tax return while also becoming relevant for Italian taxation.
Similarly, if you own rental property in the United States, the rental income doesn’t disappear from your Italian tax picture simply because the property is located overseas.
How does the US-Italy tax treaty help?
The US-Italy Tax Treaty helps reduce double taxation and determines which country has taxing rights in certain situations, but it does not eliminate a US citizen’s obligation to file US tax returns.
The US-Italy Income Tax Treaty was designed to coordinate the tax systems of both countries. Depending on the type of income, it may:
- determine which country has the primary taxing right;
- reduce or eliminate withholding taxes on certain payments;
- clarify how pensions, dividends, interest, and royalties are taxed; and
- help prevent the same income from being taxed twice.
However, there’s an important limitation. Because of the treaty’s saving clause, the United States generally continues taxing its citizens as though many treaty provisions did not exist.
That doesn’t mean the treaty has no value. Certain treaty provisions still provide meaningful relief, and they often work alongside the Foreign Tax Credit rather than replacing it.
Should I claim the Foreign Tax Credit or the Foreign Earned Income Exclusion?
Because Italy generally has relatively high income tax rates compared with the US, many Americans find that the Foreign Tax Credit provides greater long-term flexibility. Italian income taxes may offset much or all of their US income tax, and unused credits can sometimes be carried forward to future tax years.
That doesn’t mean the FEIE is a poor choice. Depending on your income level, employment situation, and long-term plans, it may still provide valuable tax savings. Some taxpayers also use both provisions together where the rules allow.
However, you generally cannot claim a Foreign Tax Credit for taxes paid on income you excluded using the FEIE.
Foreign Tax Credit vs. Foreign Earned Income Exclusion
Both the Foreign Tax Credit (FTC) and the Foreign Earned Income Exclusion (FEIE) are designed to reduce double taxation, but they work in very different ways.
The Foreign Tax Credit allows you to claim a credit for certain income taxes paid to Italy. Instead of excluding income from your US tax return, it reduces your US tax liability by taking into account foreign taxes you’ve already paid.
The Foreign Earned Income Exclusion works differently. Rather than claiming a credit, it allows eligible taxpayers to exclude up to a certain amount of qualifying foreign earned income from US taxation, provided they meet the applicable residency or physical presence tests.
FTC vs FEIE functions
| Feature | Foreign Tax Credit | Foreign Earned Income Exclusion |
| Reduces double taxation | Yes | Yes |
| Based on foreign taxes paid | Yes | No |
| Excludes earned income | No | Yes |
| Can benefit taxpayers in higher-tax countries | Often | Sometimes |
| Available for investment income | In some cases | No |
There’s no universal answer. A taxpayer working remotely for a US employer may reach a different conclusion than someone who owns investments, rental property, or a business in Italy.
Credits and deductions expats can claim in Italy
US tax benefits that may still be available
- Additional Child Tax Credit (ACTC): Up to US$1,700 per qualifying child, subject to IRS rules.
💡 This is one of the few credits that may still be refundable for expats, even when little or no US tax is owed, depending on income and filing method.
- IRA contributions: Possible if you meet IRS income and eligibility rules.
- Education credits: Available in limited cases if IRS requirements are met.
If you become an Italian tax resident, you may qualify for certain deductions or credits under Italian law.
Italian tax deductions, credits, and incentives
- Social security contributions: Mandatory and some voluntary contributions may be deductible.
- Pension contributions: Deductible up to EUR 5,300.
- Domestic worker contributions: Deductible up to EUR 1,549.37.
- Medical expenses (disabled individuals): May be fully deductible.
- Alimony payments: Deductible if court-ordered (excluding child support).
- Charitable contributions: Certain charitable contributions may be deductible or creditable, subject to Italian rules, payment method, recipient type, and annual limits.
- Employee tax credits: Commonly used instead of expense deductions.
US and Italian tax benefits operate separately, so coordinated planning is important when filing in both countries.
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What tax rates apply in Italy?
Italy uses a progressive personal income tax system (IRPEF), meaning the tax rate generally increases as your taxable income increases. In addition to national income tax, many taxpayers also pay regional and municipal income taxes.
Unlike the United States, where many people focus primarily on federal income tax, Italy’s personal income tax system has several layers. Your overall income tax bill may include:
- National personal income tax (IRPEF), which uses progressive tax brackets.
- Regional income tax, with rates that vary by region.
- Municipal income tax, which varies depending on your municipality of residence.
This means two people earning the same income may pay slightly different amounts of tax if they live in different parts of Italy.
Main taxes Americans may encounter in Italy
| Tax | What it applies to | Who is commonly affected? |
| IRPEF (Personal Income Tax) | Employment income, self-employment income, and certain other taxable income | Most Italian tax residents |
| Regional income tax | Additional income tax set by each Italian region | Most tax residents |
| Municipal income tax | Additional local income tax | Most tax residents |
| Capital gains tax | Profits from selling certain investments and assets | Investors |
| Tax on dividends and interest | Investment income | Investors and account holders |
| Italian wealth taxes (IVAFE and IVIE) | Certain foreign financial assets and foreign real estate | Some tax residents with overseas assets |
| VAT (IVA) | Goods and services purchased in Italy | Consumers |
| Inheritance and gift taxes | Transfers of wealth | Beneficiaries and donors in certain situations |
It’s worth noting that not every tax applies to every American living in Italy. For example, someone working for an Italian employer may mainly deal with employment taxes, while a retiree with investment accounts or overseas property could face additional reporting or tax considerations.
Likewise, VAT isn’t something you’ll calculate on your income tax return. Instead, it’s generally included in the price of goods and services you purchase throughout Italy.
For many US expats, the most significant tax is still IRPEF, since employment and self-employment income make up the largest share of their taxable income. However, if you own investments, foreign property, or substantial financial assets, understanding Italy’s investment and wealth tax rules becomes equally important.
Do I have to report my Italian bank accounts?
Possibly. If you have financial accounts in Italy, you may need to report them to the US government through an FBAR, Form 8938, or both, depending on your circumstances.
These reporting forms are informational, meaning they don’t automatically create additional tax. Instead, they help the US government identify foreign financial accounts and assets held by US taxpayers.
The two most common reporting requirements are the FBAR and Form 8938. Although they appear similar, they have different filing thresholds, reporting rules, and filing destinations.
FBAR vs. Form 8938
| Requirement | FBAR | Form 8938 |
| Filed with | FinCEN | IRS |
| Filed with your tax return? | No | Yes |
| Reports | Foreign financial accounts | Specified foreign financial assets |
| Filing threshold | Aggregate foreign account value exceeds US$10,000 at any time during the year | Thresholds vary based on filing status and whether you live in the US or abroad |
| Can both apply? | Yes | Yes |
For example, if you open an Italian checking account, a savings account, and an investment account, you’ll need to consider the combined value of those accounts when determining whether an FBAR is required. Separately, you’ll also need to determine whether your total foreign financial assets exceed the Form 8938 filing threshold.
Does Italy have wealth taxes?
Yes. Italy imposes wealth taxes on certain foreign financial assets and foreign real estate owned by Italian tax residents. Unlike the United States, which generally taxes income rather than net wealth, Italy has separate taxes that may apply simply because you own certain assets outside the country.
The two wealth taxes Americans are most likely to encounter are:
- IVAFE, which generally applies to certain foreign financial assets.
- IVIE, which generally applies to foreign real estate owned outside Italy.
These taxes are separate from income tax. In other words, even if an overseas investment or property doesn’t generate income during the year, it may still fall within Italy’s wealth tax rules.
📌 Note: The rates and calculation methods can change, so Americans moving to Italy should confirm the current IVAFE and IVIE rules each year.
How are retirement accounts taxed?
Retirement accounts can be complex because the US and Italy may tax them differently. Many Americans moving to Italy already have retirement savings such as IRAs, 401(k)s, or employer pensions. While these accounts are familiar in the US, Italy may not treat them the same way.
The tax treatment of withdrawals can depend on the type of account, when contributions were made, and applicable treaty rules.
Similarly, if you begin participating in an Italian pension plan, you’ll need to understand how that income is reported on your US tax return.
Retirement accounts commonly encountered by Americans in Italy
| Retirement asset | US treatment | Italian treatment |
| Traditional IRA | Generally taxable when withdrawn | Depends on Italian tax law and treaty provisions |
| Roth IRA | Qualified withdrawals are generally tax-free in the US | Treatment may differ from the US |
| 401(k) | Generally taxable upon distribution | Depends on treaty interpretation and Italian rules |
| Italian pension | Depends | Generally taxed under Italian rules, subject to treaty provisions |
One area that deserves special attention is the Roth IRA. While qualified withdrawals are generally tax-free in the US, Italy may treat them differently, so it’s worth getting advice before relying on that benefit.
The same applies to US Social Security benefits, which may be taxed differently depending on your situation.
What should I know before investing while living in Italy?
Before investing after moving to Italy, understand how both US and Italian tax rules apply.
- If you keep your US brokerage account: US investments remain reportable to the IRS. As an Italian tax resident, dividends, interest, and capital gains may also be taxable in Italy.
- If you invest through an Italian or European broker: Some non-US funds may be classified by the IRS as Passive Foreign Investment Companies (PFICs), which can trigger additional reporting and complex tax treatment.
Common investment issues for Americans in Italy
| Investment | Why it deserves attention |
| US brokerage accounts | Italian taxation of investment income |
| European mutual funds | Potential PFIC reporting |
| ETFs | Different treatment under US and European rules |
| Dividends | May be taxable in both countries |
| Capital gains | Reporting rules differ between the US and Italy |
One practical suggestion is to review your investment portfolio before becoming an Italian tax resident whenever possible. Small adjustments made early are often easier than correcting tax issues several years later.
How does self-employment work in Italy?
If you’re self-employed while living in Italy, you may have tax and social security obligations in both countries. However, the US-Italy Totalization Agreement may help prevent you from paying social security taxes twice on the same income.
Whether you’re a freelancer, consultant, contractor, or business owner, becoming self-employed in Italy adds another layer to your tax planning. In addition to reporting your business income, you may need to consider:
- Registering your business or professional activity in Italy
- Italian income tax obligations
- Italian social security contributions
- Ongoing US income tax reporting
- US self-employment tax
Fortunately, the US-Italy Totalization Agreement helps coordinate social security systems between the two countries. Depending on your circumstances, it may allow you to contribute to only one country’s social security system instead of both.
What are the most common tax mistakes Americans make after moving to Italy?
Some of the most common mistakes include:
- Assuming you only need to file taxes in Italy after moving.
- Forgetting to file an FBAR or Form 8938 after opening Italian financial accounts.
- Purchasing foreign mutual funds without understanding the US PFIC rules.
- Assuming the US-Italy tax treaty eliminates all US tax obligations.
- Choosing the Foreign Earned Income Exclusion without considering whether the Foreign Tax Credit may provide a better long-term result.
- Forgetting that Italy may tax worldwide investment income after you become a tax resident.
- Keeping poor records of foreign taxes paid and exchange rates.
Many of these issues can be avoided with planning rather than correction. Reviewing your tax situation before your move and while living in Italy can save considerable time and expense later.
What should I do before moving to Italy?
Preparing your tax affairs before you relocate can make your first year in Italy significantly easier. If you’re planning your move, here’s a general guide to prepare you before becoming an Italian tax resident.
Before you move checklist
- Review your current investment portfolio and identify any potential PFIC issues.
- Download recent US tax returns and supporting records.
- Organize documentation showing the cost basis of your investments.
- Consider whether selling certain investments before relocating makes sense for your situation.
- Understand when you’ll likely become an Italian tax resident.
- Keep records of your relocation date and supporting documents.
- Learn how the US-Italy tax treaty may affect your circumstances.
Speak with an adviser familiar with both US and Italian taxation if your financial situation is complex.
What happens if I fall behind on US filings?
Missing filings do not automatically mean penalties, but ignoring the problem often leads to larger penalties and more complicated corrections later. Penalties can apply even when no US income tax is due, especially for missed FBAR or FATCA forms.
Catch-up options for US expats living in Italy
The IRS offers programs for expats who were unaware of their obligations, including:
- Streamlined Filing Compliance Procedures
- Delinquent FBAR submission options
These are designed for non-willful mistakes. The sooner you act, the smoother the process tends to be.
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Frequently Asked Questions
Can I move to Italy in the middle of the year and still have to file taxes there?
Yes. If you become an Italian tax resident during the year, your filing obligations may differ depending on when your residency begins and your specific circumstances. Your first year often requires the most careful planning because you may have income earned before and after your move.
Can I work remotely for a US employer while living in Italy?
Yes, but your employer’s location doesn’t necessarily determine where your income is taxed. If you’re an Italian tax resident, your employment income may generally be taxable in Italy while remaining reportable on your US tax return.
Can I open an Italian bank account before becoming a tax resident?
Yes. Opening a bank account doesn’t automatically make you an Italian tax resident. However, as a US person with foreign financial accounts, you should monitor whether US reporting requirements, such as the FBAR or Form 8938, apply.
Do I have to convert my income from euros to US dollars on my US tax return?
Yes. The IRS generally requires amounts reported on your US tax return to be stated in US dollars. Depending on the type of income or transaction, you may need to use the appropriate exchange rate when converting amounts from euros.
Can I still contribute to a US retirement account after moving to Italy?
Possibly. Eligibility depends on factors such as your earned income, filing position, and the specific IRS rules for the retirement account. Living abroad doesn’t automatically prevent you from making contributions.
Should I sell investments before moving to Italy?
It depends. Some taxpayers review their investment portfolio before becoming Italian tax residents because different tax rules may apply after the move. Selling investments simply because you’re relocating isn’t always the best strategy, but reviewing your portfolio beforehand can help you avoid unexpected tax consequences.
What records should I keep after moving to Italy?
Good recordkeeping can make filing much easier. Consider keeping copies of your US and Italian tax returns, foreign tax payment records, bank statements, brokerage statements, residency documents, exchange rate calculations, and documents supporting major purchases or property transactions.
Do I need to tell the IRS that I moved to Italy?
Generally, there isn’t a separate form to notify the IRS that you’ve relocated. Instead, you would typically update your mailing address on your US tax return or notify the IRS using the appropriate change-of-address procedures if necessary.
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