Property taxes will increase in2024.

Some changes provided for in the budget law will affect real estate, specifically taxes paid on real estate. The bill entering parliament includes an increase in the fixed tax on short-term rentals and an increase in taxes on the sale of renovated houses using a superbonus. Furthermore, the impact of cadastral reform on property tax and other cadastral taxes remains unknown.

The political forces in the majority have reached an agreement on the budget law for 2024. The number of articles has increased from 83 to 109. Resources remain limited, and the introduction of additional provisions does not affect the deficit. The government intends to obtain approval from the chambers as soon as possible, ensuring protection against any amendments. Everything that could be revised has been done. Now the intention is solely to implement what is stipulated in the budget law.

Among the proposed measures, there are also provisions related to real estate that may impact the property sector, which has withstood the effects of the pandemic and continues to cope with the rising cost of living. And although the words "work" and "families" have been repeatedly used as slogans, the latter will be somewhat affected if certain housing taxes are increased. Let's take a look at what this is about.

The fixed tax on short-term rentals is increasing from 21% to 26%.

The issue of the fixed tax on short-term rentals seems to have been resolved. Starting in 2024, it will increase from the current 21% to 26%, but only for short-term rentals (i.e., for periods of less than 30 days) and only for the second property. The tax rate remains at 21% for the rental of the first home. Small property owners, such as those renting out a house on the coast or in the mountains to earn some extra income, can breathe a sigh of relief, but not those who run short-term rentals as a real business, for example, on platforms like Airbnb and Booking. Nevertheless, Forza Italia continues to disapprove of this regulation. "We are monitoring the fixed tax on short-term rentals, discussing it, and we will see what guarantees will be provided to citizens who own homes and then rent them out for short periods," commented Deputy Prime Minister and Secretary of Forza Italia Antonio Tajani yesterday on Rainews24. Confedilizia is also skeptical about this, with its president Giorgio Spaziani Testa stating: "After it has been established that the goal of the law is not to generate income, do we really think that increasing the tax on short-term rentals will promote long-term rentals? This will not happen. Instead, hotel prices will rise, there will be more vacant homes, the shadow economy will thrive, and villages in our rural areas will have less hope of coming back to life. Repealing this provision is an act of common sense."

Based on all this, the question arises: how much will the tax on short-term rentals increase for families?

A fixed tax on short-term rentals and Forza Italia's proposal for a national identification code.

As part of the budget plan, it seems that a proposal for a national identification code to track apartment renters has been accepted. "It has already been implemented, for example, in Greece and has increased short-term rental income tenfold. On the contrary, an increase in the fixed tax on short-term rentals may stimulate the shadow economy," explained the national press secretary and deputy chairman of the Forza Italia faction in the Chamber, Raffaele Nevi. The idea is to limit the shadow economy, as many homeowners rent their properties short-term without declaring the income to tax authorities. According to the Forza Italia plan, this code will be necessary for registration on platforms like Booking or Airbnb. Ultimately, instead of a law on short-term rentals that was supposed to eliminate tax evasion, a compromise solution was preferred, which does not fully satisfy everyone.

Higher sales taxes on renovated homes with a super bonus

Among the measures provided for in the budget law, there is also a tax levy on the sale of real estate owned by individuals who have taken advantage of the 110% super bonus. After some political forces expressed dissatisfaction, the provision seems to have been confirmed: the capital gains tax rate on the sale of properties other than primary residences and those inherited will increase to 26% if work benefiting from the super bonus was carried out in the previous period. Those who renovated a second home and sell it within 10 years after the work will be taxed at a 26% capital gains rate on their income. In the first 5 years, renovation costs cannot be deducted from profits, as is currently done, and in the following 5 years (from the sixth to the tenth), they can be deducted at 50%. Inherited properties are not included in this rule.

Tax on bank transfers for construction bonuses: from 8% to 11%

Article 23 of the draft budget law, titled "Measures to Combat Tax Evasion and Rationalize Procedures for Loan Compensation and Seizure of Financial Relations," with paragraph 1 amends Article 25 of Regulation No. 78/2010, increasing the withholding rate on accounts from 8% to 11% as an advance payment on income tax payable by recipients, with mandatory reimbursement when payments related to bank transfers are credited, which are ordered by taxpayers to receive deductions or are entitled to a tax deduction. The withholding, which will be increased starting March 2024, as stated in the Budget, thus "deprives" businesses of funds received in their bank accounts, as they receive an amount reduced by this withholding. Ultimately, in this case, the impact on citizens or those making bank transfers is indirect, while it affects the lost revenue of businesses by about 1 billion.

Property whose taxes will change as a result of the cadastral reform

In addition to the budget law, it is also worth mentioning the expected reform of the cadastre, which, if not delayed by further setbacks, is set to come into effect on January 1, 2024. Overall, this will be a comprehensive reassessment of Italian real estate, with the introduction of new tools that will be used by individual municipalities and the tax administration to determine the correct classification of buildings. It is difficult to predict in advance what impact the cadastre reform will have on taxpayers' pockets. However, the reassessment of IMU and other cadastral taxes is considered inevitable.

In conclusion, the budget law passed in parliament will also affect real estate. This includes an increase in the fixed tax on short-term rentals and a rise in taxes on the sale of renovated homes using the 110% super bonus. It is also worth mentioning the reform of the cadastre, which will undoubtedly impact property-related taxes, from IMU to mortgage taxes, although it is still unclear what the burden will be on property owners.