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First Home Benefits: Complete Guide to Taxes and Tax Advantages

First Home Benefits: Complete Guide to Taxes and Tax Advantages

Buying your first home is an important milestone that requires significant financial commitment. Fortunately, Italy offers specific tax benefits that significantly reduce initial expenses. This guide details these advantages, explains eligibility requirements, and highlights critical points to avoid losing the benefits obtained.

What Are First Home Benefits?

First home benefits are tax incentives designed to facilitate the purchase of your primary residence. They vary based on whether you’re purchasing from a private seller or a builder.

1. Purchase from Private Seller (or VAT-exempt Company)

When purchasing from a private seller or a company selling without VAT, benefits include:

  • Reduced registration tax of 2% (instead of the standard 9%).
  • Fixed mortgage tax of €50.
  • Fixed cadastral tax of €50.

However, the proportional registration tax (2%) cannot be lower than €1,000. Still, the amount payable may be reduced by deducting proportional tax already paid on the preliminary contract deposit or through tax credits from previous “first home” purchases.

The Price-Value System

The price-value mechanism applies to non-VAT transactions, including those with first home benefits. The taxable value is calculated by multiplying the cadastral income (increased by 5%) by a coefficient of 110.

Example Calculation:
Suppose your first home has a cadastral income of €900 and the sale price is €200,000. Using the price-value system, the tax base is: €900 × 1.05 × 110 = €103,950. The registration tax (2%) would then be €2,079 (€103,950 × 2%). Without this system, the tax would be calculated on the full €200,000, resulting in €4,000.

2. Purchase from Builder (with VAT)

When purchasing from a builder or a company applying VAT, benefits include:

  • Reduced VAT rate at 4% (instead of 10% or 22%).
  • Fixed registration tax of €200.
  • Fixed mortgage tax of €200.
  • Fixed cadastral tax of €200.

These benefits greatly reduce the overall purchase cost, making the purchase especially attractive to young buyers and families.

Who Qualifies for First Home Benefits?

To qualify for these benefits, you must meet specific criteria:

  • Property Category: The property must not belong to luxury categories (A/1 – stately homes, A/8 – villas, or A/9 – castles/historical buildings).

  • Property Location: You must buy the home in the municipality where you currently reside or commit to moving your residence there within 18 months after the purchase. Alternatively, you can purchase in the municipality where you work.

  • Ownership of Other Properties: You must not own another property purchased with first home benefits unless you sell it within 12 months of the new purchase. Additionally, you cannot own another property in the same municipality.

Where Must the Property be Located?

The property must be in your municipality of residence. If not, you must move your residence there within 18 months. This intention must be clearly stated in the purchase deed.

Residency transfer is considered effective from the date the application is submitted to the municipality. Benefits also apply if the property is located:

  • Where you work (including voluntary, study, or sports activities).
  • In the municipality of your birth or previous residence/activity if you moved abroad for work reasons after residing in Italy for at least five years (as clarified by Circular no. 3/2024 by the Revenue Agency).

For members of the armed forces or police, residency in the municipality is not required.

How to Claim First Home Benefits?

Benefits must be explicitly declared in the notarial purchase deed. Clearly inform your notary about your eligibility and confirm compliance with all conditions. The notary will include this declaration in the deed.

Beware of Losing the Benefits

If you fail to meet the conditions—such as not transferring residence within 18 months or not selling a previously owned property within 12 months—you will lose these benefits. Consequently, you must pay:

  • The difference between standard and reduced taxes previously paid.
  • A penalty equal to 30% of this difference.
  • Accrued interest.

Conclusions

First home benefits offer substantial savings when purchasing your primary residence. However, thoroughly understanding the eligibility criteria and respecting the legal conditions is essential to avoid losing these advantages.

For further information or specific cases, consult the official Revenue Agency Guide.

Luigi Ragone