Italy

Tax credits

An individual who qualifies as Italian tax resident can deduct from gross income tax liability the following main tax credits if all the conditions requested by the Italian tax law are met and if properly documented:

• Employment tax credits.
• Family tax credits (as from March 2022 these have been replaced by the 'Assegno Unico Universale').
• Other tax credits for expenses.

Employment tax credits

Employment tax credits vary depending on the income:

• Employment income.
• Pension income.
• Self-employment income.

Employment income tax credit

The employment income tax credit is determined as follows:

The tax deduction is increased of EUR 65 if the gross income is between EUR 25,000 to EUR 35,000.

In addition to the classic system of tax deductions provided for by the Italian Tax Code, the Law no. 21/2020 and the Italian Budget Law for FY 2021, in view of a revision of the tax deductions and income support measures, introduced the recognition of a sum by way of additional treatment.

The recognition of a sum by way of additional treatment, which does not contribute to the formation of income and which therefore constitutes a net amount, amounts to 7,1% of the employment income if it not exceeds EUR 8,500 per year, 5,3% if the employment income is in the range between EUR 8,500 and EUR 15,000, 4,8% if the employment income is higher than EUR 15,000 per year

In addition the Italian Budget Law for fiscal year 2025 provided for an additional deduction for the employees with an annual employment income included in the range EUR 20,001 and EUR 40,000 per year.

The amount of the additional deduction is EUR 1,000 if the gross taxable income is between EUR 20,000 and EUR  32,000. The additional deduction is prorated if the gross taxable income is between EUR 32,001 and EUR 40,000 per year. 

Pension income tax credit

The pension income tax credit is determined as follows:

Self-employment income tax credit

The self-employment income tax credit is determined as follows:

Family tax credits

As a general rule tax credits are granted to resident taxpayers with a dependent spouse, children, and other relatives living with the taxpayer, provided that each dependant’s annual income does not exceed EUR 2,840.51. For children under 24 years of age, the income limit to be considered has been raised to EUR 4,000 from FY 2019.

Family tax credits are rated monthly and are applied as of the month in which the conditions verify and up to the month in which conditions stop.

The family tax credit varies according to dependent spouse and family dependants.

* For each child with disabilities, the applicable basic tax credit shall be increased by EUR 400.

For taxpayers with more than three dependent children, the applicable basic tax credit should be increased by EUR 200 for each child.

The child deduction must be imputed at 50% to both parents when none of them is considered as a dependant of the other for tax purposes; where the parents are separated or divorced, the entire deduction shall be imputed to the parent having custody of the child.

From 1 March 2022, the family tax credits for dependent children will apply only for children above 21 years of age and below 30 years of age (as recently amended by the Italian Budget Law for FY 2025)

For children below 21 years of age, there will not be any tax credit in the tax return; however, it will be possible to request for a monthly payment from the Italian social security authorities, and the amount (from EUR 50 to EUR 175 per child) will depend mainly on the 'family economical situation index' (ISEE).

Other tax credits

Some other expenses entitle the taxpayer to a tax credit. The tax rate is 19% of the total amount paid.

The allowable deductions are prorated for the individuals who earn a gross taxable income higher than EUR 75,000 oer EUR 100,000 per year and in relation to the number of dependents children in the family.

Mortgage interest credit

Tax credit is granted on interest on real estate mortgage loans issued from banks of the European Union, financial institutions, or other EU entities if they refer to the ‘habitual abode’ in Italy. Other requirements (e.g. year when the contract was signed) must be satisfied to be eligible.

The tax credit is equal to 19% of the mortgage interests paid. The maximum amount on which the tax credit is calculated is EUR 4,000.

Medical expenses credit

The tax credit is equal to 19% of the medical expenses paid for the amount exceeding EUR 129.11 if duly supported by receipts.

Education expenses credit

University expenses are deductible up to an amount equal to the cost charged by public educational institutions fixed by the education authority each year.

For nursery, elementary, secondary, and high school, the total maximum educational expense on which will be calculated the 19% rate is EUR 800 per annum per child. The Italian Budget Law for 2025 increased the maximum amount on which it is allowed to calculate the deduction up to EUR 1,000 per annum per child.

School fees for registration of children up to three years old are deductible on the above percentage of the maximum amount of expenses of EUR 632.

Life and accident insurance credit

Life and accident insurance is deductible, only if related to the case of death, invalidity, or non-self-sufficiency, for the maximum amount of EUR 530.

Sporting association’s fees credit

Sporting association’s fees for children between 5 and 18 years old are deductible on 19% of the maximum amount of expenses of EUR 210 per year per child.

Rental fees credit

A fixed amount tax credit, depending on the total income of the taxpayer, for annual rental fees paid for the principal abode is available under certain conditions (this tax credit can be used just for individuals who have gross taxable incomes under EUR 30,987.41).