How Does the Transfer of Tax Deductions Work when Selling a Renovated Property?

When you sell a property, what happens to the tax deductions related to its renovation? Who are they entitled to? And who is entitled to the same tax deductions in case of donation, usufruct, exchanges, or death of the owner of the renovated property? Let’s examine this together.

The Sale of a Renovated Property

Tax bonuses represent a very important incentive for all those who are about to renovate a property. Today, the Renovation Bonus with 50% deductions is an excellent opportunity for many. However, if you then intend to sell or transfer the renovated property, it’s important to remember that the tax deductions related to renovation works remain associated with the property in question. Consequently, when it is sold, the tax deduction will be automatically transferred to the buyer. The unused deduction will therefore be transferred from the seller to the buyer, who will benefit from it for the entire remaining tax period, as established by the Circular of the Revenue Agency n. 7/E/2018.

This is the standard procedure; however, it is possible to intervene to agree differently between the parties. The seller can retain their right to benefit from the unused tax deductions if the contracting parties formalize and sign their intention at the time of the notarial deed of sale, or through the drafting of an authenticated private agreement, as established by the Circular of the Revenue Agency n. 7/2021, page 301. In the absence of an agreement, the deduction is transferred to the buyer

What happens if you don’t sell the entire property, but only a share of the ownership? In this case, the deduction cannot be transferred to the buyer, unless the buyer purchases the shares in order to become the full owner of the property.

The Transfer of Tax Deductions in Case of Tax Deductions and Free Donations, Exchanges, and Usufruct

The same tax mechanism valid for the sale of a renovated property also applies in the case of free donations and exchanges. However, the situation becomes more complex in the case of usufruct. In this case, the unused deduction quotas are not transferred to the usufructuary but remain with the bare owner. If the tax deduction belongs to the tenant or the borrower of the building, they can maintain their right to the missing quotas even after the lease or use of the property is terminated.

The Transfer of Tax Deductions in Case of Death

In the event of succession due to death, that is, in the case where the owner of the renovated property passes away, the deductions will be due to the heir who has the property at their disposal and has material possession of it, or to the surviving spouse who holds the right of habitation. If there are multiple heirs and none of them actually live in the property, but all have it at their disposal, the deduction will be divided equally among all of them. If the inherited property is leased or loaned to third parties, there will be a freezing of the tax deduction, which can only become usable again with the termination of the lease agreement. Similarly, if the inherited property is sold to third parties, the residual tax deduction will be lost, belonging neither to the seller nor to the buyer.

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