What happens when a property that has been renovated using the renovation bonus is sold? Do the unused Irpef deductions remain with the seller or pass to the new owner? Let’s look at how it works in detail.
50% deduction and property sale
Under current rules, tax deductions are at 50% for renovation work on primary residences and 36% on second and third homes, up to a maximum of 96,000 to be recovered over 10 years by deducting them from Irpef payments.
The tax bonus is linked to the property; therefore, if it is sold before the 10 years have passed—and thus before the person who carried out the renovations has utilized the entire deduction—the remaining installments pass to the home buyer. This is provided for by legislation and confirmed by circular no. 19/E/2020.
An agreement between the parties is sufficient
This situation, however, is not definitive: there is an exception to the general rule that allows the seller to continue benefiting from the remaining deduction installments, even after losing ownership of the property.
This is a useful option in cases where the seller has incurred significant expenses and intends to complete the tax deduction cycle.
The two parties, seller and buyer, can therefore agree that the remaining deductions stay with the seller: this agreement must be recorded in the notarized deed of sale or, as explained by the Revenue Agency in circular 7/2021, through a private agreement that shows the intent of the agreement from the date of the deed. The document must be authenticated by a notary or another public official with the signatures of both parties.
Naturally, the conduct of both parties, seller and buyer, when filing tax returns must be consistent with what was established in the notarized deed or private agreement.
Documentation to be retained
If an agreement is reached for the deduction to remain with the seller, it is important for the latter to keep a copy of the deed of sale, indicating the agreement between the parties (or the private agreement), along with documentation of payments made, invoices relating to the work, and any correspondence with the buyer or the notary.
Renovation bonus and properties under usufruct, lease, or inheritance
In the case of properties renovated with the home bonus that are granted in free usufruct, leased, or inherited, the situation changes.
In the case of usufruct, the unused installments remain with the bare owner.
In the case of a lease, if it was the tenant who carried out the renovation work, they will continue to benefit from it for the entire period of enjoyment, even if the lease should terminate.
In the event that one inherits a property with unused deductions, these pass to the heirs who maintain “material and direct possession of the property,” a condition that must be met every year the deductions are claimed: if the property is rented out for three years, the deductions cannot be used for those three years, but can be resumed when the property returns to the direct possession of the heir.
Finally, as an exception to the general rule, in the event of the sale of an inherited property, the unused deduction installments do not transfer to the new buyer.
