Transferable tax deductions in the event of inheritance of real estate

When a property is inherited, questions may arise regarding the use of tax deductions, particularly for expenses incurred for building restoration work. A very important aspect is that deductions not used by the deceased are transferred to the heirs, but only in certain cases and under specific conditions.

Transfer of deductions to heirs

The Revenue Agency, in response no. 192/2023, confirmed the possibility of transferring deductions for expenses relating to building recovery from the deceased to the heirs. In particular, the regulatory reference is Article 16-bis, paragraph 8, of the Consolidated Law on Income Tax (Presidential Decree no. 917/1986, TUIR), which regulates the tax deduction for the recovery of building assets in the event of inheritance.

The law specifies that, in the event of the death of the entitled party, the residual portions of the tax deduction can be passed on in full to the heirs, but only to those who retain physical and direct ownership of the property. This means that the heir must actually own and use the property to benefit from the unused tax deductions.

How the transfer of the tax deduction works

If there are multiple heirs and they all own the property in question, the deduction shares are divided equally among them. However, if one of the heirs does not physically own the property, they cannot benefit from the residual deductions.

It is important to note that, as clarified by the Revenue Agency in response no. 612/2021, in the event of the death of the heir who acquired the deduction, the residual shares are not transferred to the next heir. This interrupts the transfer of the tax benefit.

Cases of sale or donation

The same principle applies in the event of the sale or donation of the property by the heir who physically and directly owns it. Unused residual deductions cannot be transferred to the new owner or the donee. This rule was reiterated in circular no. 7/E of June 25, 2021, which establishes that the tax benefit is not passed on in the event of a sale or donation.

Heirs can benefit from tax deductions related to expenses for building restoration work incurred by the deceased, but only if they retain direct ownership of the property. In the case of multiple heirs, the deduction is divided equally, while it is not passed on in the event of the heir's death or the sale of the property. The tax regime is therefore clear, but it is essential to be aware of these details to avoid losing the right to benefits, which can be explored in greater depth with the professionals at Agenzia delle Successioni.