Changes in the construction sector and in the taxation of real estate

The tax deduction for renovation works on residential buildings for expenditure of up to EUR 96,000 (instead of a maximum of EUR 48,000) under Art. 16-bis TUIR remains at the same level as introduced last year:

• 50% for costs borne by the owner or holder of a right in rem for renovation works on their main residence, and
• 36% for works in other cases.

The maximum deduction, in each case to be spread in equal parts over 10 years, therefore varies between EUR 48,000 and EUR 34,560.

Note: the main residence is the dwelling in which the owner or family members have their permanent residence. It is sufficient for only one family member to live there. If the owner has two dwellings (one as the taxpayer's main residence, the other as the family member's main residence), only the owner's dwelling can be treated as the main residence for the purposes of the increased deduction. Only the normal deduction applies to the other dwelling (Circular no. 89/2025).

The deductions were in fact due to be reduced in 2026 from 50% to 36% and from 36% to 30%, retaining the EUR 96,000 ceiling for recognised expenditure. That restriction has not materialised.

The exclusion of the relief for the replacement of heating systems remains unchanged where new systems are installed which are powered exclusively by fossil fuels.

The deduction under Art. 16-bis TUIR for the purchase of dwellings in buildings fully renovated by construction companies also remains in place, where the sale takes place within 18 months of completion of the works. The deduction is therefore unchanged at 50% (main residence) or 36% (other cases of purchase), applied to 25% of the purchase price, with the base for the deduction not exceeding EUR 96,000.

The deductions are spread in equal parts over 10 years.

The deduction for the purchase or construction of ancillary garages, with a cost ceiling of EUR 96,000, likewise remains in place. Here too the deduction is 50% for units ancillary to the main residence and 36% in other cases.

In 2026 as well, the general rule applicable to renovation works on residential buildings also applies to deductions for energy retrofitting expenditure under Law 296/2006:

• 50% for costs borne by the owner or holder of a right in rem for their main residence, and
• 36% in all other cases.

The permitted cost ceilings for energy retrofitting expenditure (Art. 1(344)-(349) of Law 296/2006) remain unchanged. Please note: the cost ceilings have shifted upwards as a result of the reduction of the percentages to 50% and 36% respectively. An overview follows:

• The exclusion for the installation of fossil-fuel heating systems set out above applies here as well.

The relief for energy retrofitting is also available for commercial property and may continue to be claimed by businesses irrespective of their legal form, now of course only at the reduced rate of 36%.

The deduction is in principle spread over 10 years in equal instalments.

The so-called Superbonus of 110% of expenditure is now history; temporary extensions apply only in special cases.

The special relief for the removal of architectural barriers (75%) has also come to an end. For such works, "only" the relief for general renovation works is now available (50% or 36% on maximum expenditure of EUR 96,000). Significantly, this change blocks access to the relief for businesses and non-residential buildings.

For payments made up to 31 December 2025 the "old" relief of course still applies.

The 50% tax bonus for the purchase of furniture and appliances (energy class A+ only, or A for ovens) in connection with renovation works has been extended to 31 December 2026; as in the previous year the ceiling is EUR 5,000.

As reported, the ENEA notification is also required for the purchase of appliances. In addition, the deduction may be claimed in 2026 only by those who started renovation works on the building unit (dwelling) concerned after 1 January 2025; it is not necessary for those works to have been paid for already (Revenue Agency ruling no. 62/2019).

The deduction is also available for furnishing dwellings purchased after renovation by construction companies, provided the purchase took place after 1 January 2025.

The deduction must still be spread over 10 years.

The Budget Law for 2025 extended the relief for earthquake-resistant construction for the years 2025 to 2027, but with a reduced deduction: 50% (main residence) or 36% (other buildings) for 2025, instead of the earlier 75% or 85% (depending on the type of work). This rule is now confirmed unchanged for 2026; in plain terms, the reduction to 36% (main residence) or 30% (other cases) originally envisaged has not materialised here either.

The increased tax bonus (75% or 85%, depending on the type of works) for the purchase of earthquake-proofed renovated dwellings (the "sismabonus-acquisti") was already abolished at the end of 2024. It should be recalled, however, that the credit remains available at 50% (main residence) or 36% (other cases); companies too are entitled to the reduced 36% credit, and the bonus is not limited to property used for residential purposes. In concrete terms, a renovated office may be acquired by a company and the 36% deduction is available. It should be added that this relief cannot be claimed in South Tyrol, because the province is not classified as at risk of earthquakes.

More good news: the additional restrictions introduced for 2026 by Art. 1(4) of Law 199/2025 for the 19% specific expenses under Art. 15 TUIR do not apply to tax deductions in the construction sector. That provision states that, for taxpayers with total annual income exceeding EUR 200,000, the deduction available for expenditure incurred in 2026 is reduced by EUR 440.

The existing graduated IRPEF exemption for land and agricultural income is extended for 2026. The relief is available to direct farmers (coltivatori diretti – CD) and professional agricultural entrepreneurs (imprenditori agricoli professionali – IAP) under Legislative Decree 99/2004, provided they are registered with the agricultural social security scheme.

As was already the case for 2024 and 2025, the exemption is graduated by income in 2026 as well. Land and agricultural income is subject to the following rules:

• up to EUR 10,000: fully exempt from IRPEF;
• over EUR 10,000 up to EUR 15,000: 50% exempt;
• over EUR 15,000: fully taxable (fully included in the IRPEF base).

The measure represents a time-limited continuation of tax relief for agricultural entrepreneurs.

Please note: the exemption does not apply to agricultural companies organised as commercial companies.

The rules on the tax classification of short-term lettings of real estate have been tightened from 2026: from the third property let onwards, the activity qualifies as a business activity (previously only from the fifth property). The income derived from it is therefore no longer subject to the flat-rate taxation of private rental income, with the possible option for the substitute tax ("cedolare secca") of 21% or 26%. In addition, registration with the commercial register is required where at least three dwellings are let short-term.

As a reminder: short-term lettings are those lasting up to 30 days, and in the extreme case it is enough to let three different dwellings for one weekend each during the year (i.e. short-term) to become a business.

In summary, the following rules apply from 1 January 2026:

• Anyone letting only one dwelling short-term during the tax period may apply the substitute tax at 21%.
• Anyone letting two dwellings short-term during the tax period may apply the substitute tax at 21% to only one dwelling (to be designated in the tax return) and the substitute tax at 26% to the other.
• Anyone letting three dwellings short-term during the tax period must register a business activity and may, where applicable, opt for the flat-rate regime ("regime forfettario").

The option to revalue shareholdings and non-business land was already introduced last year as a permanent rule. By 30 November of each year, individuals, simple partnerships and non-commercial entities may revalue land not held in a business at market value as at 1 January 2026, against payment of a substitute tax. The substitute tax remains unchanged at 18%.

Important: while the substitute tax on the revaluation of shareholdings was increased to 21% in 2026, for land it remains unchanged at 18%.

Payment may be made in a single instalment by 30 November or in three equal annual instalments falling due on 30 November each year, with interest of 3% charged.

Contrary to numerous press reports and announcements by one of the governing parties, the Budget Law does not for the time being contain a building amnesty, for example in the form of a new edition of the 2003 "condono edilizio". It should be noted, however, that on 4 December 2025 the government approved a draft law reforming the consolidated building act (Law 380/2001). That draft contains indications of a building amnesty, or at least of an extended possibility of regularising building infringements. The reform is unlikely to acquire the force of law before the end of 2026 at the earliest. Until then, one may hope.