For Income Tax In Italy – 28000 Is The Magic Number

Updated to reflect Italian tax rules in 2026

You may wonder what is so significant about the number 28,000 in Italy. Well, I will enlighten you in a moment.

The majority of expats I meet who decide to relocate to Italy are either Northern European or from Anglo‑Saxon countries searching for some hot weather or wishing to sample the Mediterranean lifestyle. Whatever the motivations, it doesn’t really matter.

It is often the case (but not always) that countries in the North of Europe and the USA have financial systems which encourage saving in tax‑incentivised pensions, in savings or in retirement plans. Equally, they often have preferential tax rates to encourage businesses and entrepreneurs to prosper in their early years when revenues are lower. The simple idea is that if you are incentivised to make provision for yourself and invest back into your business, then you will be less of a burden on the state in the future. Selling a business can also act as a kind of pseudo‑retirement plan in itself. This means that you lock a large part of your life savings into schemes or businesses which will provide you with an income later on in life. This would seem to be a sensible strategy for both government and individuals.

The problem we have is that when you move to Italy, there are few incentives to prepare for your future in the same way. In fact, the government takes control of the majority of your life savings (either through INPS or other mandatory pension contributions) under which you have little or no control. In addition, there are few non‑taxable income allowances, which has the effect of reducing disposable income for individuals and reducing capital available for reinvestment just when a business needs it the most, although there are various bonuses which can be taken advantage of if you want to make repairs or renovate a home.

My interpretation of this mechanism (I am sure there are much more complex political and social issues at hand here, but I am merely trying to simplify elements of the system which affect you and me) is that by locking future savings into government‑controlled systems such as INPS, the government can charge income tax on these monies as “earned income” in the future and hence provide itself with a guaranteed income stream on which it can calculate future spending plans.

Which brings me on to income tax rates in Italy and the significance of 28,000.

For expats in Italy, income tax is mainly applied to the following incomes: gross income from employment, gross pension income in Italy and from overseas net rental income from property and some kinds of investment income and / or realised gains . In my experience, a lot of expats living in Italy have a property in their home country which they are renting out, have income from pensions or employment in their country of origin and, in some cases (but not many), are taking income from a portfolio of some description. .

The financial planning issue here is that when all of these are added together, they can often start to breach the higher levels of income tax (IRPEF) in Italy. As of 2026, the national income tax bands are as follows: 23% on income up to €28,000, 35% on income from €28,000 to €50,000, and 43% on income above €50,000. Regional and municipal taxes are added on top, usually bringing the effective rate a few percentage points higher.

And here lies the significance of 28,000 in Italy.

The income tax rate on income below €28,000 per annum gross is approximately 23%. This would seem reasonable, but there are no non‑taxable income allowances and so tax starts from euro number one. Once you start to breach the €28,000 gross band and enter the more punishing 35% and 43% income tax bands (and add on regional taxes), then you are realistically into 40–42% on income over €28,000 per year.

So what is the solution?

Well, once again it all comes down to the planning.

The first and most obvious solution is to spread your income. Where possible, spread your income as a couple — for example, putting houses into joint names and spreading the income tax burden. By spreading the income, you are moving a part of it into a partner’s tax bracket. If one of you has a lower taxable income than the other, then it makes sense to utilise some of the lower‑earning partner’s income tax bands.

Also, think about how you might be able to release money from pensions. As a resident in the UK, you can withdraw 25% of a pension plan tax‑free. It makes sense to do that before you move. That same withdrawal as a tax resident in Italy would be considered taxable income and added to your other incomes in that year.

In the UK and the USA, you may be able to cash in some or all of your retirement plan. This particular scenario might be more complicated if there is a tax charge involved, but if you are serious about planning to reduce tax liabilities in Italy, then taking a lower tax charge in your home country before you move might be better than being subject to higher ongoing income tax rates in Italy. This would need serious consideration before a decision were made, but it could be a possibility.

And lastly, move as much of your money as possible to unearned income sources, such as income from directly held investments or savings. In this way, you are subject to a flat tax of 26% on the capital gains and/or the income from those investments. (** some investments do attract income tax rates and so investment planning would need to be conducted before a move)

As a general rule, if you can split a couple’s income, generate income from investments (not from retirement plans), and some from property rental, you can bring your overall tax rate down to approximately 26–30%. A level which I think is more acceptable to most, although a lot depends on your income requirements as well.

Of course, I have simplified the situation here and everyone’s circumstances are different, but the methodology is the same. How can you take advantage of the lowest tax rates possible by restructuring and spreading your finances to make them more effective in Italy?

Which brings me nicely back to my initial point: the magic number is €28,000.

Italy does not, presently, incentivise its residents to invest in long‑term retirement savings plans, and so a move to Italy breaks with Anglo‑Saxon and Northern European mentality when thinking about how to plan for the future. Some of the best‑laid long‑term plans can be scuppered when those decisions include a move to another country with a financial system based on totally different principles and systems.

If you plan on waiting for tax reductions you could be waiting a long time. Planning your way around the system seems to be the optimum choice rather than waiting for the government to do anything about it for you.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.