Taxing US Social Security Benefits in Italy: what you need to know (2024)

FAQs

Taxing US Social Security Benefits in Italy: what you need to know? ›

In conclusion, Italy does tax retirement income, including US social security benefits, but there are tax treaties and agreements in place to avoid double taxation. As a retiree in Italy, you may also be subject to Italian social security contributions if you work or have income in Italy.

Tax residents pay taxes on worldwide income — which includes any US-based retirement, Social Security, or pension payments — while non-tax residents pay taxes only on Italian-sourced income.

Absence from U.S. territory

Normally, people who are not U.S. citizens may receive U.S. Social Security benefits while outside the U.S. only if they meet certain requirements. Under the agreement, however, you may receive benefits as long as you reside in Italy regardless of your nationality.

You report the taxable portion of your social security benefits on line 6b of Form 1040 or Form 1040-SR. Your benefits may be taxable if the total of (1) one-half of your benefits, plus (2) all of your other income, including tax-exempt interest, is greater than the base amount for your filing status.

- Agreement between the competent authorities of both contracting countries. In order to avoid any risk of double taxation, it is recommended to apply to the Italian Revenue Agency a certificate of residence for tax purposes, to be presented to the foreign country where income was produced during a given year.

In conclusion, Italy does tax retirement income, including US social security benefits, but there are tax treaties and agreements in place to avoid double taxation. As a retiree in Italy, you may also be subject to Italian social security contributions if you work or have income in Italy.

What is the 7% flat tax in Italy? Italy's 7% tax regime for retirees allows holders of a foreign pension the chance to transfer their tax residence to one of the municipalities in the South of Italy.

The United States and Italy have a totalization agreement in place, which is designed to avoid double taxation of their income with respect to social security taxes. It establishes clear rules about which country's social security system covers the employee.

The Social Security five-year rule is the time period in which you can file for an expedited reinstatement after your Social Security disability benefits have been terminated completely due to work.

Have you heard about the Social Security $16,728 yearly bonus? There's really no “bonus” that retirees can collect. The Social Security Administration (SSA) uses a specific formula based on your lifetime earnings to determine your benefit amount.

At what age is Social Security no longer taxable? ›

Social Security tax FAQs

Social Security income can be taxable no matter how old you are. It all depends on whether your total combined income exceeds a certain level set for your filing status. You may have heard that Social Security income is not taxed after age 70; this is false.

The rationalization for taxing Social Security benefits was based on how the program was funded. Employees paid in half of the payroll tax from after-tax dollars and employers paid in the other half (but could deduct that as a business expense).

You would not be required to file a tax return. But you might want to file a return, because even though you are not required to pay taxes on your Social Security, you may be able to get a refund of any money withheld from your paycheck for taxes.

Employees or self-employed workers who live in Italy for more than 183 days a year are considered residents for tax purposes. This means they need to pay Italian income levies on their worldwide earnings. Those living in Italy for less than 183 days a year only need to pay income tax derived within the country.

American expats in Italy are also subject to regional income taxation. Regional income tax rates range from 1.23% to 3.33%, depending on the applicable region of residence.

Taxes in Italy

Even though you won't be able to work in Italy with a residency visa, you still need to file taxes as an Italian resident. Foreign income tax rates in Italy are generally quite low, and the country has a 7% flat tax policy on foreign pensions.

US expats in Italy need to be aware of two different national tax systems. First, virtually all US citizens are required to file an annual US Federal tax return, regardless of whether they live in the United States or Italy. Second, by living in Italy, American expats also can be subject to Italy taxation.

Cons of retiring in Italy

Navigating residency permits, healthcare paperwork, and other administrative tasks may require patience. Language Barrier: While English is spoken in tourist areas, some regions may have a language barrier, especially in more rural locations.

Art. 24-ter of the Italian Income Tax Code (as introduced by the 2019 Budget Law), provides the new 7% Italian Flat Tax regime to encourage retirees abroad to transfer their tax residence to Italy.

A 7% flat tax on all income for all pensioners (regardless of nationality) who: have been tax resident outside Italy for at least five (5) years prior to the tax year in which they become Italian tax […]