Tax Deduction on Mortgage Interest for Properties Abroad: Is It Possible?

Can You Deduct Mortgage Interest for a Property Abroad?

When it comes to deducting mortgage interest for a property abroad while being a resident in Italy, the rules are quite clear.
According to the Italian Revenue Agency, the deduction of mortgage interest for a property located abroad is not allowed.

Italian Tax Law: Article 15 of the Consolidated Income Tax Act allows taxpayers to benefit from a tax deduction for mortgage interest on their primary residence.
The deduction amounts to 19% of a maximum expense of 4,000 euros per year, specifically on interest paid and not on the capital.

Maximum Deduction: As this deduction falls under income tax relief, the maximum amount that can be subtracted from the income tax is 760 euros per year.

Case Scenario: A taxpayer, who is an Italian citizen residing in Germany and has purchased a property in Germany to use as their primary residence, inquires with the Italian Revenue Agency about the possibility of deducting the mortgage interest paid for the property.

Response from the Italian Revenue Agency: The Italian Revenue Agency, in its section “FiscoOggi,” emphasizes that both Italian tax residents buying property abroad and non-residents purchasing property abroad are not eligible for the deduction of mortgage interest on such properties, as stated in the guidelines for filling out the Income Tax Return form PF 2024, booklet 2.
This restriction applies irrespective of the taxpayer working for an Italian ministry and receiving income from Italy, as there is no extraterritoriality consideration in this context.

So, in conclusion, if you are a resident in Italy and have purchased a property abroad, you cannot deduct mortgage interest for that property according to the regulations enforced by the Italian Revenue Agency.

For further insights into tax deductions related to mortgages in Italy, refer to the Italian Revenue Agency’s guidelines and updates on tax relief provisions.