Article 1, paragraph 155, of the 2022 Financial Law (Law 234/2021) has provided for the possibility for young people under 31 to recover part of the rents paid through a tax deduction applicable to the gross tax to be paid for IRPEF purposes.
The deduction, active until 2022, is in addition to those already provided for those under 36 for loans taken out to purchase their first home.
Deductions for lease payments were introduced by Article 16 of the Consolidated Income Tax Act (Presidential Decree 917/1986), amended in 2007 (Law 244), in 2014 (Law 91) and lastly by the new Financial Law for 2022.
The amounts and income limits vary according to the type of lease contract entered into or renewed by the beneficiary.
The rules for the deduction of rent are indicated by the Inland Revenue's instructions for the compilation of the 730/2021 form. Let's see in detail what it is all about.
COMMON ASPECTS
All the deductions of rent provided for by law have common aspects:
(a) the beneficiary must be the holder of the lease;
(b) the rented property must be a dwelling unit used as a main residence;
(c) the deduction is linked to the taxpayer's earning capacity;
(d) the deduction is recognised in relation to the number of days on which the property has been used;
(e) the different deductions are not cumulative (unless the taxpayer is in different situations at different times of the year), but the taxpayer may choose the most convenient deduction.
The term 'main dwelling' means the dwelling in which the tenant or his/her family members usually live. In the case of joint tenants, the deduction is granted pro rata in relation to the income of each.
DEDUCTION FOR FREE RENTAL CONTRACTS (paragraph 01, art. 17 TUIR)
Tenants of residential units used as their main residence, stipulated or renewed pursuant to Law 431/1998 (Regulations on leases and the release of properties for residential use) are entitled to a deduction amounting in total to:
a) € 300.00, if the total income does not exceed € 15,493.71;
b) € 150.00, up to the income threshold of € 30,987.41.
DEDUCTION FOR AGREED RENTALS (paragraph 1, art. 17 TUIR)
When the rent is agreed, pursuant to Articles 2, paragraph 3, and 4, paragraphs 2 and 3 of Law 431/1998, the deduction is equal to:
a) € 495.80, if the total income does not exceed the threshold of € 15,493.71;
b) € 247.90, up to the income threshold of € 30,987.41.
DEDUCTION IN CASE OF TRANSFER OF RESIDENCE (paragraph 1-bis, art. 17 TUIR)
The deduction for rent is also available to workers who transfer their residence to the municipality of work or to a neighbouring one.
The law requires some additional conditions to be met:
* he/she must be an employee;
* the move must have taken place in the three years preceding the year in which the deduction is claimed;
* the new municipality of residence must be at least 100 km away from the previous one and in any case outside the region of residence.
The deduction is granted for the first three years of the contract and is equal in total to:
a) € 991.60, if the total income does not exceed € 15,493.71;
b) € 495.80, up to the income threshold of € 30,987.41.
OFF-CAMPUS STUDENTS
University students away from home may benefit from the 19% deduction up to € 2,633 of expenditure for each tax year, provided that the university is at least 100 km far away from the municipality of residence and is located in a different province.
The deduction cannot, therefore, exceed the sum of € 500.00.
YOUNG PEOPLE'S RENT BONUS (paragraph 1-ter, art. 16 TUIR)
The new paragraph 1-ter of Article 16 of the TUIR, as amended by the 2022 Financial Law, regulates the deduction of rents paid by young people aged between 20 and 31 years not yet completed.
In order to qualify for the deduction, the following conditions must be met:
* ownership of the lease contract stipulated pursuant to Law 431/1998 (free or conventional rent);
* the property leased must be used as a residence and must be different from the home of parents or foster parents;
* the total income must not exceed the threshold of € 15,493.71.
The lease may concern the entire property unit or a portion of it, to be used as a residence.
The benefit is limited to the first four years of the contract, and consists of a deduction from gross tax of € 991.60, or 20% of the amount of the rent, whichever is higher, and in any case within the maximum limit of € 2,000.
The subsidy does not cover expenses relating to the security deposit, condominium charges, utilities and brokerage costs.
The grant for young people is not allowed for the following properties:
* properties bound under Law 1089/1939;
* buildings included in the A/1, A/8 and A/9 cadastral categories, to which only the rules laid down in the Civil Code apply (Articles 1571 et seq.);
* public residential housing;
* accommodation rented for tourist use.
THE DEDUCTION IN THE AGRICULTURAL SECTOR
Also in the agricultural sector it is possible to benefit from the deduction for rents.
The beneficiaries are farmers and professional farmers registered in the agricultural register who are under 35 years of age.
The benefit consists in a 19% deduction of the expenses incurred for the rental of agricultural land, provided that it is different from the land owned by the parents, up to a limit of € 80 per hectare rented and up to a maximum of € 1,200 per year.
The aid must be granted under the "de minimis" regime provided for in EU Regulation 1408/2013 with reference to aid that can be granted in the agricultural sector in compliance with the rules (Articles 107 and 108) of the TFEU (Treaty on the Functioning of the European Union).
The rental contract must be drawn up in writing.
INSTRUCTIONS FOR FILLING OUT THE 730 FORM
The fields to be filled in for the deduction of rent are in Section V of the 730 form, field E.
In order to keep the deduction, it is always advisable to produce self-certification that the property is used as a main residence and to keep a copy of the registered contract.
Are you under 31 and would like to rent a flat?
Contact us to choose the most appropriate deduction.
