Under the Regime Ordinario, rental income from real estate investments is taxed as part of the individual’s overall income and subject to the progressive tax rates of IRPEF.
This means that landlords must include rental income in their annual tax return and pay taxes based on their total taxable income, including income from other sources.
Additionally, landlords can deduct eligible expenses related to the maintenance and management of their rental properties, such as property taxes, maintenance costs, and property management fees. However, deductions are subject to certain limitations and requirements outlined by Italian tax law.
Alternatively, landlords have the option to choose the Cedolare Secca, a simplified flat-rate tax regime specifically for rental income from residential properties.
Under the Cedolare Secca, landlords pay a flat-rate tax on their rental income, typically set at 21% of the gross rental income.
One of the primary advantages of the Cedolare Secca is its simplicity, as landlords are not required to report rental income or expenses in their annual tax return.
Instead, the flat-rate tax is withheld by the tenant and remitted directly to the tax authorities.
While the Cedolare Secca offers simplicity and predictability in tax planning, landlords should carefully consider their individual circumstances and financial objectives before opting for this regime, as it may not always be the most tax-efficient option.
When investing in real estate in Italy, landlords must evaluate the pros and cons of each taxation regime to determine the most suitable approach based on their specific circumstances and investment goals.
Consulting with a tax advisor or legal expert can provide valuable guidance and ensure compliance with Italian tax laws and regulations. Additionally, staying informed about changes in tax legislation and seeking professional advice can help landlords make informed decisions and optimize their real estate investment strategy for tax efficiency and financial success.
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