Italy's building bonus: Can you really claim back the cost of renovating property?

Under the Italian government’s Superbonus scheme, homeowners could benefit from a tax deduction of up to 110% on the expenses related to making energy upgrades and reducing seismic risk.

The scheme is part of the government’s Decreto Rilancio (Relaunch Decree), introduced as an emergency response to the economic impact of Covid-19.

READ ALSO: How and where to find your dream renovation property in Italy

A form of this bonus existed before the pandemic, but as the nation fell into a coronavirus-induced economic slump, the government increased the allowance.

The financial injection is hoped to boost the construction and real estate industries and provide an opportunity to reinvigorate the nation’s many old, damaged and inefficient buildings.

A staggering 70% of houses in Italy are more than 50 years old, according to the Agenzia delle Entrate (Italian Revenue Agency). With only 9% of homes in Italy built this century, restoring older properties looks more likely than buying a new-build for some time to come.

What funding is available?

There are two notable bonuses available for restorations: the ‘Ecobonus’ and the ‘Sismabonus’ and you can use both in conjunction.

According to the decree, it’s even possible to buy a wreck and use the bonus to create a new home.

Since the Superbonus scheme has now been extended from December 2021 to the end of 2022, there’s even more chance to cash in.

Is this all too good to be true? Who’s eligible to apply and how do you access the funds? 

Here’s a breakdown of the government regulations and the pitfalls to watch out for.

Note: The schemes are complex and subject to change, so it’s important to get professional advice before buying and renovating.

Think carefully before you decide to buy a quirky old Italian property to renovate. Photo: Christophe Simon/AFP

The Ecobonus

To benefit from this bonus, you need to improve the property’s energy efficiency by two ratings, for example from D to B.

The services you can claim for include installing thermal insulation and the replacement of winter air conditioning systems.

You can further upgrade your energy infrastructure with funds assigned for fixtures and windows, solar panels, boilers and even electric charging points for cars.

There’s a spending limit for each category, though. For example, an upper limit of €48,000 is granted for solar panels.

Professionals must be hired to carry out the work and provide an energy performance certificate as proof (l’attestato di prestazione energetica - A.P.E.).

The scheme also covers shared areas of buildings, detached houses, social housing and single-family homes, even within multi-family buildings.

Interestingly enough, upgrading two homes is also allowed, which may be an alluring prospect for those looking to buy a second home in Italy.

However, if you’re planning on splashing out on a luxury property, you’ll have to renovate it without government help. Prestigious villas and castles are excluded from the financial aid.

So how do you access the Ecobonus? 

There has been a recent change to the fine print, which means there are more options available.

Firstly, you could use the tax deduction method over five years, which works well if you want to offset high taxes from your income. To go down this route, you must be an Italian resident paying income tax, known as ‘IRPEF’.

So, in theory, if you spend €50,000 on renovating your home, you could be eligible for up to €55,000 in tax credit over five years. That means you’d get a tax rebate of €11,000 per year.

But this only works if you’re paying more tax (IRPEF) than that per year, as any unused tax credit is lost.

What if you own a property in Italy but don’t have Italian residency?

You can still access the Superbonus.

There are two other possibilities, which are both available to non-residents.

In return for a commission, you can transfer the tax credit to another party, such as tax credit institutes or banks.

The latest way to access the scheme seems relatively smooth and requires no advance payment.

You can apply for a discount on the invoice, effectively trading your tax credit to the contractors. This means the supplier recovers the bonus on your behalf, taking a slice of it as a fee.

In this scenario, the homeowner effectively has no dealings with the government payment.

File photo: AFP

House buyer Enrico Fabbri took this last option, as it seemed the simpler route for him and his young family.

“We have bought an old house because of the government bonus. Since you can also now let the supplier handle all the finance and bureaucracy, it seemed too good an opportunity to miss,” he said.

They had been looking for a house for 18 months, hoping to take advantage of the bonus in its previous and smaller form.

Since the post-Covid offer increased for a limited time, they sped up their search and snapped up a property that “far exceeded what they could have afforded prior to the bonus”.

They’re not sure how much they’ll save yet, but they estimate that from a final figure of around €350,000 to buy and renovate the property, the cost to them will be €150,000, meaning a hefty potential saving of €200,000.

READ ALSO: How to stay out of trouble when renovating your Italian property

Not everyone has found the process this straightforward, though.

A British expat who lives in Piemonte told us that they were initially excited to use this bonus to renovate their older property but had to “give up”.

On starting the process, they discovered that their home wasn’t compliant with regulations and so would have to be changed before they could access the Superbonus.

If a room is designated as a space that can’t be lived in, such as a ‘cantina’, and it’s being used as a bedroom, you’re not eligible to apply.

The only way to go ahead with the government-backed energy upgrades is to pay for the alterations to be made. Our source told us this would run into thousands of euros and so it was no longer worth it.

If you do meet the criteria, though, the Ecobonus potentially offers huge savings and should leave you with cheaper energy bills in the long run.

The Sismabonus

This bonus is for properties at risk of earthquakes. To access this pot, the property must be in an area of seismic risk 1, 2 or 3.

READ ALSO: Which areas of Italy have the highest risk of earthquakes?

The properties covered are the same as the Ecobonus, but unlike it, there is no limit to how many houses you can renovate with this source of funding.

You’ll need an expert to assess the seismic risk and provide a certificate to prove the work has been effective in guarding against earthquakes.

The final result must demonstrate a reduction in seismic risk by one or two classes.

Here’s where the Sismabonus gets interesting: buildings that are demolished and reconstructed are also covered. That means you can buy a wreck and build a new home with government money.

There are clauses to watch out for, such as if the wreck is in a historic centre, for example. It’s essential in this case to maintain the previous characteristics of the old building and rebuild the property the same size.

However, for the amount of derelict buildings in Italy, this could breathe life into long abandoned properties and lost land.

You can access this bonus using the same routes as the Ecobonus.

Which one you ultimately choose depends on your personal circumstances, such as whether you hold residency in Italy, or how much income tax you pay.

Has the Superbonus affected the Italian property market?

Property expert Erika Gottardi, from estate agency Tecnocasa in Bologna, says she has noticed a marked surge in people looking for homes in need of renovation.

“Older homes are preferred at the moment, as people want to use the bonus to upgrade them. There’s also a greater interest in detached houses with a garden, but that could be attributed to Covid,” she said.

READ ALSO: How will Italy’s property market change in 2021?

She added that she has also witnessed an increase in people who are sticking with their current property and renovating it using the government help, instead of buying a new house.

Next steps

For further details, please see the Italian government website’s Superbonus 110% section. It provides in-depth guidance on who is eligible, the application process and a host of FAQs.

Even though this is a limited-time deal, remember to check with professionals before you rush in and buy a home in need of renovation or decide to upgrade your existing property.

If you’re keen to buy, you may also want to read our guide to the additional costs you might not be expecting, and take a look at some of the common mistakes to avoid when buying a house in Italy.

See more in The Local's Italian property section.