What is a ‘mixed loan’ in Italy and what tax deductions are available for this type of mortgage? Today, we investigate the concept of the Italian “mutuo misto”.
The term ‘mixed loan’ in Italy has a very specific meaning, not the same as it is in other countries. If you take out a mixed mortgage in Italy it is not for the purchase of a mixed-use building (residential and commercial, for example), but rather to buy and restructure a property.
There are certain tax deductions available for those who take out a mixed loan, but how do you deduct the interest payable? The Italian Tax Agency, or Agenzia delle Entrante, is responsible for this.
With case no. 38 of 2019, the Tax Office clarified the case of a taxpayer who had purchased an apartment with the intention of dividing it into two, to use part of it as his main residence and part of it as the residence of one of his parents. To this end, he had taken out a mixed loan, intended partly for purchase and partly for renovation.
There are tax rebates in Italy for mortgages for buying a house on the one hand and for renovating one on the other hand:
- The deduction provided for contracting a loan in Italy is 19% of the interest expense for a maximum expenditure of 4 thousand euros (item to be indicated in line E7 of tax form modello 730).
- For the mortgage for renovation work, you are allowed a deduction on your IRPEF income tax of 19% on a maximum of 2582.29 euro (to be indicated in E8 with code 10).
So, which tax deduction is applied in the case of mixed mortgages?
The Italian Revenue Agency reminds us the requirements necessary to be eligible for these tax refunds, including that your name must be on both the property deed and the mortgage contract; and that you not own other properties benefitting from the tax breaks for first homes. After that, the opinion of the Agency is that the two deductions are cumulative, but under certain conditions.
The house must become your main residence within six months of the completion of the restructuring work; two years must not have elapsed since the purchase of the house; the double bonus is allowed for the period of construction of the building and for six months afterwards (and not, therefore, for the entire duration of the loan). After six months, the tax deduction will only apply to the part of the loan necessary for the purchase, not for the refurbishments.
Remember that these tax refunds apply only to the taking out of mortgages in Italy, but there are other tax reductions you can apply for restructuring Italian property.
From the original Italian article: https://www.mutui.it/mutuando/mutuo-acquisto-e-ristrutturazione-detrazioni-cumulabili-a-tempo.html (Mutui.it)
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