The question I hear most often from sellers is not “how much is my home worth?” or “how do I sell quickly?” It is: “How much tax will I pay on the sale?”
The answer depends on 3 variables: how long you have owned the property, how you acquired it, and how much you sell it for compared to the purchase price.
In most cases, those selling their primary residence pay nothing. But there are situations where the tax is real, significant, and — if not planned for — can come as a surprise at closing.
What Property Capital Gains Tax Is
Capital gain is the positive difference between the sale price and the original purchase cost. If you bought an apartment for €200,000 and sell it for €300,000, the capital gain is €100,000.
In certain cases, tax is due on this difference.
That “in certain cases” part is the key point. The law provides specific exemptions.
When You Pay Nothing
Primary residence owned for 5 years. If you bought the property as your primary residence and lived there for most of the 5 years preceding the sale, the capital gain is completely exempt from tax. This is the exemption that applies to the vast majority of residential sales in Italy.
Property owned for more than 5 years (second home or otherwise). If you bought the property more than 5 years ago, even if it is not your primary residence, the capital gain is exempt. The 5-year period starts from the date of the purchase deed.
Property received by gift or inheritance, sold after 5 years from succession. If you inherited or were gifted the home and sell it more than 5 years after the opening of the succession (or the donation), you are exempt.
These exemptions cover most cases. Tax becomes relevant mainly for those selling recently purchased properties, investment properties, or inherited homes sold within 5 years.
When Tax Is Due
Second home sold within 5 years of purchase. In this case, the capital gain is taxable.
Primary residence not occupied for most of the 5 years. If you bought it as a primary residence but did not actually live there (because it was rented out, unused, or occupied only briefly), you lose the exemption.
Inherited home sold within 5 years. The capital gain is calculated as the difference between the sale price and the value declared in the inheritance estate at the time of succession. I wrote a specific article on how to calculate property value for inheritance: it is important to understand this before selling.
Recently purchased investment property. Anyone who buys, renovates, and resells within 5 years must account for capital gains tax.
The Two Tax Options
If you have to pay capital gains tax, you have 2 options.
26% substitute tax. You pay it directly to the notary at closing. The notary pays it on your behalf. It is a flat tax on the capital gain only, independent of your overall income.
Ordinary IRPEF income tax. The capital gain is added to your total income for that year and taxed according to progressive IRPEF rates: from 23% to 43% (plus regional and municipal surcharges).
For most people, the 26% substitute tax is the more convenient choice. Ordinary IRPEF only makes sense if your taxable income is very low, so that you fall into the lower brackets.
An accountant can run this calculation in 20 minutes: it is worth doing before closing, not after.
How the Taxable Capital Gain Is Calculated
The basic formula is simple:
Capital gain = Sale price – (Purchase price + related costs)
The deductible related costs include:
Notary fees at the time of purchase.
Taxes paid upon purchase: registration tax, VAT (if bought from a developer), mortgage and cadastral taxes.
Brokerage fees. Agency commissions paid both at purchase and sale, documented by invoice.
Documented renovation expenses. Only those paid within the last 5 years, with invoices issued in the owner’s name. This is one of the main ways to reduce the taxable base.
If you renovated the house and kept the invoices in order, the taxable capital gain is significantly reduced.
Practical Example
Matteo bought an apartment in Milan in 2022 as an investment, paying €280,000. He sells it in 2026 for €370,000.
Gross capital gain: €90,000
Documented deductible costs:
Purchase notary fees: €4,500.
Registration tax: €5,600.
Agency commission at purchase: €5,600.
Bathroom and kitchen renovation (invoiced in 2024): €18,000.
Agency commission at sale: €7,400.
Total deductible costs: €41,100
Taxable capital gain: €90,000 – €41,100 = €48,900
26% substitute tax: €12,714
Without documenting the renovations, he would have paid more than €23,000 in tax.
The difference lies entirely in keeping the invoices.
Why Invoices Matter
This is the point I insist on most.
Many renovations are paid in cash or handled informally. Whoever does that loses the ability to deduct them from the taxable base when selling.
If you plan to sell a renovated property within 5 years, make sure every job is invoiced in your name. The tax savings can be 2–3 times the cost of the tax burden on the invoice itself.
OMI Zones and Tax Value
The Italian Revenue Agency uses OMI values as a reference to verify whether the values declared in deeds are reasonable. If the declared price in a closing deed is much lower than the market values in that area, an audit may be triggered.
I explained how OMI zones work and how the tax authorities use them in this article: OMI Zones: What They Are and How They Work.
Selling a Home in 2026: Timing Matters
The Italian residential market in 2026 records around 800,000 transactions per year, with average prices rising by 3–7% depending on the area (source: Scenari Immobiliari). The average selling time is 5.5 months according to the Bank of Italy, with peaks of 75 days in Bologna and 51 days in central Rome (Tecnocasa).
This means that selling at the right market moment can make a difference of tens of thousands of euros compared to the tax amount.
Before deciding when to sell and how to structure the sale, reading this complete guide may help: Selling a Home in 2026: Practical Guide.
Frequently Asked Questions About Taxes on Home Sales
Do you pay taxes when selling a primary residence?
Usually no. If you bought it as your primary residence and lived there for most of the 5 years before selling, the capital gain is exempt.
What is property capital gain?
It is the difference between the sale price and the original purchase price (plus documented costs). If you sell for €300,000 a property bought for €200,000, the gross gain is €100,000.
What is the tax on capital gain?
You can choose between the 26% substitute tax (paid by the notary at closing) or ordinary IRPEF income tax (23–43%). For most income levels, 26% is the better option.
Which costs can be deducted?
Original purchase price, notary fees, purchase taxes, documented brokerage fees, and renovation costs from the last 5 years with invoices in the owner’s name.
If I inherited the house, do I have to pay?
Yes, if you sell within 5 years from the opening of the succession. After 5 years, you are exempt.
What happens if I sell within 5 years at a lower price than I bought it?
If the sale price is lower than the purchase price, there is no capital gain and nothing is due. This is called a capital loss, which cannot be deducted from other income.
