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PROPERTY

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

If you’re looking to make improvements to your Italian property, there are generous sums of state aid available for renovations. Here’s what you need to know.

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.

Member comments

  1. You say above that the Italian Government website Superbonus section can be accessed in English – how do I do that?!

  2. I am renovating an apartment in an old building at my own cost but in cooperation with the other owners have chosen to renovate and insulate the roof with the superbonus possibility. Leaving the administration and bureaucracy to the builder who has hired a lawyer to stay on top of the process.

  3. Interesting article but can anyone tell me what percentage does the supplier give you? The person who said he was getting 150,000 out of the 350,000 didn’t say how much of the total was house purchase and how much for renovations.

  4. The supplier or just a bank will give you at least 100% back – you can negotiate what happens with the 10%. If you have the capital take the lot. This is such a great deal – anyone with any kind of capital should try to find something to renovate, with such a large scope of incentive and low mortgage rates its not hard to find a winner. So many houses lying around in great locations. Put in sustainable heating/ cooling and high quality insulation and you never have any fuel bills either.

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MONEY

How much does it cost to raise a child in Italy?

How big is the financial commitment parents have to make in Italy to pay for their offspring’s needs and expenses until they’re grown up and independent? Here's a look at the predicted costs.

How much does it cost to raise a child in Italy?

Family is the bedrock of Italian society, but it’s also an unbalanced economic crutch, propping up children who leave home much later than most of their European counterparts.

Various factors are at play, from a declining birth rate, youth unemployment, being unable to get on the property ladder to young Italians moving abroad in search of better financial opportunities.

It probably comes as little shock, then, that parents in Italy end up forking out huge sums of cash to support their offspring through childhood and early adulthood (and beyond).

Even just up to the age of 18, raising a child in Italy can cost upwards of €320,000, according to data from Italian consumer research body ONF (Osservatorio Nazionale Federconsumatori).

The average spend of raising a child from 0-18 years is €175,642, but it rises in families with high incomes, classed as over €70,000 per year.

READ ALSO: Italian class sizes set to shrink as population falls further

Researchers noted that the cost of bringing up children has jumped up following the effects of the pandemic too: compared to 2018, child-rearing expenses increased by 1.2 percent by 2020.

The decrease in expenditure related to transport due to spending more time at home, as well as those incurred for sports and leisure activities, was not enough to mitigate the increase in costs for housing and utilities, which increased by 12 percent compared to 2018.

Photo by Suzanne Emily O’Connor on Unsplash

Food prices rose by 8 percent compared to 2018 and education and care jumped by 6 percent for the same timeframe.

In fact, Italy ranks as the third most expensive country in the world for raising children, only coming behind South Korea and China, according to data from investment bank JEF.

The pandemic has contributed to extending an already growing phenomenon: the decrease in annual income of Italian households.

Household income dropped by 2.8 percent from 2019 to 2020, the report found, citing data from national statistics agency Istat. It marks a further squeeze for families, especially low-income and single-parent families.

Depending on earnings, the amount needed to bring up a child until the age of 18 varies considerably.

READ ALSO: ‘Kids are adored here’: What being a parent in Italy is really like

A two-parent family with an annual income of €22,500 spends an average of €118,234.15 to bring up a child until the age of 18; for the same type of family but with an average income of €34,000 per year, the total expenditure to bring up a child increases to €175,642.72.

For high-income families, stated as over €70,000 annually, raising a child costs €321,617.36 on average.

The figures mark an increase of around €5,000 for low- and middle-income families, and a much sharper rise of €50,000 for high-income families, compared to ten years ago.

The money gets spent on housing, food, clothing, health, education and ‘other’ categories. The report revealed that the average spend on a child aged 16 years old is almost €11,500 annually, amounting to €955.78 per month.

Almost €2,000 per year gets spent on food, €1,615 goes on transport and communication, €782 goes on clothing and €1,600 goes on education annually, the report found.

They begin small, yet the costs are anything but. (Photo by LOIC VENANCE / AFP)

For the ONF, “these data highlight how, today more than ever, having a child is becoming a luxury reserved for the few, which fewer and fewer Italians are able to afford.”

READ ALSO:

The numbers on supporting children after their 18th birthday are a little hazier, as when children eventually fly the nest varies – but figures from Eurostat show that Italy ranks third in Europe for the average oldest age at which children move out of the parental home, at 30.2 years old.

Only young people from Croatia and Slovakia wait longer to live independently, while the EU average for flying the nest is 26.4 years old.

Even then after eventually leaving home at over 30 years old, it’s not entirely clear how many Italians are fully independent once they get their own address, or whether their parents continue to bankroll their living costs.

Italy’s president Sergio Mattarella sent a message to Italy’s Birth Foundation (Fondazione per la Natalità) in May stating, “The demographic structure of the country suffers from serious imbalances that significantly affect the development of our society.”

In response to worsening economic circumstances, the Italian government has recently pledged to do more to help people have families and reverse Italy’s continuing declining birth rate.

It has introduced the Single Universal Allowance (L’assegno unico e universale), but along with it has dropped various so-called ‘baby bonuses’ that provided lump sums to new parents.

The new allowance is a monthly means-tested benefit for those who have children, or are about to have a child. It is payable from the seventh month of pregnancy until the child reaches the age of 18 or in some cases, 21. For more information on what it is and how to claim it, see here.

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