Tax breaks for building renovations, the deduction for buyers and assignees of renovated properties

For building renovations it is possible to benefit from tax breaks. Anyone who carries out work on their home to be renovated is entitled to a 50% Irpef deduction, with a maximum spending limit of 96,000 euros, until 31 December 2017. However, an Irpef deduction is also provided for purchases of renovated buildings for residential use.

In particular, the deduction applies in the case of renovation interventions involving entire buildings, carried out by real estate construction or renovation companies and by building cooperatives who arrange, within 18 months from the date of completion of the works, for the subsequent sale or assignment of the property.

This deduction has also been increased from 36 to 50% when the expenses for the purchase of the property are incurred in the period between 26 June 2012 and 31 December 2017 and is within the maximum amount of 96,000 euros (instead of 48,000 euros). From 2018, the deduction will return to the ordinary rate of 36% on a maximum amount of 48,000 euros.

The buyer or assignee of the property must in any case calculate the deduction (50 or 36%), regardless of the value of the interventions carried out, on a lump sum amount, equal to 25% of the sale price (including VAT) or assignment of the home.

The deduction must always be divided into 10 annual installments of the same amount. The maximum allowable expenditure limit (48,000 or 96,000 euros) must refer to the single housing unit and not to the number of people participating in the expenditure. Consequently, this amount must be divided among all those entitled to the benefit.

The deduction applies when restoration and conservative rehabilitation and building renovation interventions have been carried out as per letters c) and d) of paragraph 1 of the art. 3 of Presidential Decree 380/2001.

However, it is not applicable if simple ordinary or extraordinary maintenance operations have been carried out. In addition to the owner, the bare owner and the holder of a real right of enjoyment of the property (use, usufruct, residence) are also entitled to benefit from the deduction. In the case of purchase of bare ownership and simultaneous establishment of the right of usufruct, it is necessary to divide the deduction in proportion to the value of the two real rights.

Conditions required to benefit from the relief

The Irpef deduction applies to the following conditions:

• the real estate unit must be sold by the construction or real estate renovation company or by the cooperative that carried out the interventions;
• the purchase or assignment of the housing unit must take place within 18 months from the date of completion of the works;
• the property purchased or assigned must be part of a building on which restoration and conservative rehabilitation or building renovation interventions involving the entire building have been carried out; the relief applies, therefore, provided that the building interventions concern the entire building (and not just a part of it, even if significant);
• the term "property" must be understood as a single real estate unit and the benefit is not linked to the sale or assignment of the other real estate units constituting the entire building, so that each buyer can benefit from the deduction with their purchase or assignment.

The purchaser of the property can also benefit from the deduction for the amounts paid in advance provided that on the date of submission of the tax return the preliminary purchase agreement or the deed have been registered (circular no. 43/E of 18 November 2016).

Required obligations and documents

To benefit from the discount it is not necessary to make payments by bank transfer. However, the taxpayer must be in possession of the registered purchase deed, assignment or preliminary sales document, which shows compliance with the terms indicated above.

If these documents do not indicate the date of completion of the works or do not indicate that the property is part of a completely renovated building, the taxpayer will have to ask the construction company or building cooperative for a declaration certifying the conditions required to benefit from the relief.

Can be combined with other discounts

For purchases made in 2016 and 2017, if you also intend to benefit from the 50% deduction of the VAT paid to the construction company (benefit provided for the purchase of residential real estate units of energy class A or B), the amount of 50% of the deducted VAT must be subtracted from the amount of expenses incurred for the purchase of the property.

In essence, the two benefits can be combined, but the general principle applies according to which it is not possible to claim two benefits on the same expense.

The deduction cannot be combined, however, with the 20% deduction of the purchase price of properties intended for rental (concession provided for by art. 21 of Legislative Decree 133/2014).

Therefore, on the purchase cost of the property it is possible to alternatively benefit from either the 20% deduction or the deduction for the purchase of the renovated property.