Italy Personal Income Tax Guide 2026 — IRPEF (23-43%)

How the Italian Tax System Works

Italian personal income tax — known as IRPEF (Imposta sul Reddito delle Persone Fisiche) — is administered by the Agenzia delle Entrate (Revenue Agency). Every taxpayer is assigned a codice fiscale (tax identification code), which serves as the primary identifier for all interactions with the tax authority. Individuals can access their tax data through the Cassetto Fiscale (tax drawer) on the Agenzia delle Entrate website or the Spid (Sistema Pubblico di Identità Digitale) system. The tax year in Italy is the calendar year (1 January to 31 December). Tax residency is determined by three criteria: an individual is considered an Italian tax resident if they are registered in the Registry of Resident Population (Anagrafe) for most of the tax year (at least 183 days), have their habitual abode in Italy, or have their centre of vital interests (personal and economic relations) in Italy. Residents are taxed on their worldwide income, while non-residents are taxed only on Italian-source income. Note: Italian citizens who transfer their tax residency to a black-listed jurisdiction (tax haven) are presumed to remain Italian residents unless they prove otherwise.

IRPEF Rates 2026

For 2026, Italy applies a progressive IRPEF rate structure with three brackets (reduced from the previous 4-bracket system under the 2024 IRPEF reform):

Progressive Brackets: (1) Up to €28,000 — 23%. (2) €28,001 to €50,000 — 33%. (3) Over €50,000 — 43%. The progressive rate applies only to the portion of income exceeding each threshold. For example, an individual earning €40,000 pays 23% on the first €28,000 and 33% on the remaining €12,000.

Regional Surcharge (Addizionale Regionale): Each Italian region levies an additional IRPEF surcharge on taxable income. The standard base rate is 0.7% to 3.33% depending on the region (e.g., Lombardy ~1.35%, Lazio ~1.4%, Sicily ~2.1%). The surcharge is calculated on the same taxable income base as IRPEF. Most regions apply a progressive rate.

Municipal Surcharge (Addizionale Comunale): Each comune (municipality) may levy an additional surcharge of up to 0.8% (some municipalities exceed this for specific purposes). The combined effect means the top marginal rate in some areas can approach 47% (43% national + up to 3.33% regional + up to 0.8% municipal).

What Counts as Taxable Income: Taxable income includes employment income (reddito di lavoro dipendente), self-employment income (reddito di lavoro autonomo), business income (reddito d'impresa), pension income (pensione), rental income from property (reddito fondiario), investment income (reddito da capitale — dividends, interest), capital gains (plusvalenze), and other income (redditi diversi). Certain income is subject to substitute taxes (imposta sostitutiva) rather than IRPEF — such as the 26% flat tax on most financial income. Exempt income includes the primary residence's cadastral value, IMU on principal residence (abolished for most), and certain social benefits.

Tax Deductions and Allowances

Italian tax law provides several categories of deductions (oneri deducibili) that reduce your taxable income before IRPEF is applied. Most require documentation submitted with the annual tax return.

Employee Deductions (Deduzioni per lavoro dipendente): Employees receive an automatic deduction from taxable income based on their total income level. For employment income (reddito di lavoro dipendente), the deduction equals: €1,880 for income up to €15,000; €1,910 + 1,190 × (28,000 − income)/13,000 for income between €15,001 and €28,000; €1,910 × (50,000 − income)/22,000 for income between €28,001 and €50,000; zero for income above €50,000.

Common Deductible Expenses (Oneri Deducibili): Expenses that may be deducted from total income include: medical expenses for specific conditions (not ordinary medical costs), social security contributions (INPS), alimony payments to a separated spouse (if court-ordered), contributions to supplementary pension funds (up to €5,164.57 per year), charitable donations to certain non-profits, expenses for dependent family members (conuge a carico — spouse without income, figli a carico — dependent children, with specific income thresholds), and mortgage interest on the primary residence loan (up to €4,000 of interest per year, 19% tax credit).

Tax Credits (Detrazioni d'Imposta): Rather than deductions that reduce taxable income, Italy makes extensive use of tax credits (detrazioni) that directly reduce the tax owed. These include: 19% of eligible expenses for medical costs (exceeding €129.11), education, funeral costs, sports for children, life insurance (up to €530 premium), and veterinary expenses; 50% of renovation costs (recupero edilizio — up to €96,000 total spending, spread over 10 years); 65-90% for energy efficiency improvements (ecobonus, superbonus depending on the type of work); 36-50% for furniture purchases linked to renovation; and 19-36% for real estate agent fees on primary residence purchase.

Tax Residency Rules

An individual is considered an Italian tax resident if they meet at least one of three conditions for most of the tax year (at least 183 days): (a) they are registered in the Italian Registry of Resident Population (Anagrafe), (b) they have their habitual abode in Italy, or (c) their centre of vital interests is in Italy. Italian residents are taxable on their worldwide income. Individuals moving to Italy may benefit from the impatriati regime (impatriate worker regime) — a special 50-90% exemption on employment income for new residents who relocate their tax residence to Italy, subject to meeting certain conditions (residence abroad for at least 2 years, commitment to stay in Italy for at least 2 years). Individuals moving from Italy should formally cancel their Anagrafe registration to avoid continued Italian tax liability. The nexi (new tax resident regime for wealthy individuals) allows new residents to pay an optional substitute tax of €100,000 per year on foreign-source income (plus €25,000 per family member) — attractive for HNWI considering relocation to Italy.

How to File (Modello 730 / Redditi PF)

Most employed and pensioner taxpayers in Italy file using the Modello 730 form, while self-employed individuals and business owners typically file the Modello Redditi PF (formerly Unico Persone Fisiche).

Modello 730: Available from late April to 30 September for the previous tax year. The 730 form is simpler and is pre-filled with employer and social security data. It is submitted electronically through a CAF (Centro di Assistenza Fiscale), a commercialista (accountant), or directly via the Agenzia delle Entrate website (precompilata — pre-filled return). Refunds are credited through the employer's payslip or directly to the taxpayer's bank account. If tax is due, it is deducted from the payslip (for employees) or paid directly.

Modello Redditi PF: For self-employed individuals, entrepreneurs, and taxpayers with complex situations. The deadline is 30 November of the following year (extended from the original 30 October). This form covers all income types, deductions, and tax credits. Payment of any tax due must be made by 30 June (first instalment) and 30 November (second instalment), with a small penalty for late payment.

Employer Withholding (Sostituto d'Imposta): For employed individuals, the employer acts as a sostituto d'imposta, withholding IRPEF, regional and municipal surcharges, and INPS contributions from each payslip. The employer provides an annual Certificazione Unica (CU) summarising total income, tax withheld, and social contributions paid. The CU is available by 16 March of the following year and is used to pre-fill the 730 form.

Tax Payment Deadlines: For the 2025 tax year (dichiarazione 2026): 730 filing by 30 September 2026; Redditi PF filing by 30 November 2026. Any balance due is paid in two instalments: 40% by 30 June 2026 and 60% by 30 November 2026. Withholding agents remit taxes regularly throughout the year via the F24 payment form.

Social Contributions (INPS)

Italy's social security system is managed by INPS (Istituto Nazionale della Previdenza Sociale). Both employees and the self-employed contribute a percentage of their income to fund pensions, unemployment benefits, sickness, maternity, and family allowances.

Employee Contributions: Employees pay approximately 9.19% to 10.49% of gross salary (depending on the employment sector). The employer pays an additional 23% to 32% depending on the industry and risk classification. The total contribution is approximately 33% of gross salary (employee share ~10%, employer share ~23%).

Self-Employed Contributions: Self-employed individuals registered with the Gestione Separata INPS pay approximately 25% to 34% of their taxable income, depending on whether they are enrolled in other pension schemes. Those registered with the Gestione Artigiani e Commercianti (artisans and merchants) pay a flat rate on income up to approximately €18,000, then a percentage above that threshold. The regime forfettario (flat-rate regime for small businesses) offers reduced INPS contributions of approximately 26% for artisans and merchants, and 25% for Gestione Separata taxpayers.

Minimum Contributions: Self-employed taxpayers must pay minimum INPS contributions even if their income is very low. For 2026, the minimum annual contribution for artisans is approximately €3,900 and for merchants approximately €3,500. Gestione Separata contributors have no minimum if income is below €5,000.

FAQs

Do non-residents pay IRPEF?

Yes. Non-residents pay IRPEF only on Italian-source income, at the same progressive rates as residents. There is no flat rate for non-residents (unlike many other countries). Italian-source income includes: employment income for work performed in Italy, income from Italian real estate, pensions paid by Italian entities, dividends and interest from Italian companies (though these are often subject to final withholding tax instead), and capital gains from the sale of Italian assets. Non-residents are not subject to regional or municipal surcharges. Tax treaties may reduce or eliminate Italian taxation on certain types of income — for example, dividends may be taxed at 15% rather than 26%, and pension income may be taxable only in the country of residence.

What is the tax on dividends?

Dividends distributed by Italian resident companies are subject to a final 26% withholding tax (imposta sostitutiva). This is a substitute tax — the dividends are not included in IRPEF taxable income for Italian residents. For non-residents, the rate is generally 26% as well, but may be reduced under an applicable double taxation treaty (commonly to 15%). Dividends from qualifying PIR (Piani Individuali di Risparmio) accounts may be tax-exempt if the holding requirements are met. Dividends from EU/EEA companies held by Italian residents are also subject to the 26% substitute tax unless the foreign tax credit mechanism applies.

Can I deduct mortgage interest?

Yes. Interest paid on a mortgage for the purchase of your primary residence (prima casa) qualifies for a 19% tax credit (detrazione) on interest paid up to €4,000 per year. This applies to mortgages taken out to purchase, construct, or renovate the primary residence. The loan must be secured by a mortgage on the property. Only the interest portion of the mortgage payment qualifies (not the principal repayment). The tax credit is available for the entire duration of the mortgage. For mortgages on secondary homes (seconde case), no such credit is available, though the interest may be deductible as a cost for rental income purposes if the property is rented out.

Disclaimer

This guide is for informational purposes only and does not constitute tax advice. Italian tax law is complex and subject to frequent change. Consult a qualified commercialista (accountant) or tax advisor for advice specific to your situation. Rates and thresholds for 2026 are based on legislation enacted by June 2026 and may be subject to amendment.