Every year, thousands of Americans, Canadians, and Brits sell their houses, ship the furniture, and move to Italy. And a surprising number of them are back home within three years, and regret retirement in Italy.
Here’s the scary part: nobody lied to them. They were told that Italy has beautiful towns, better and healthier food, a much lower cost of living, and even a special tax program designed to attract foreign retirees like you. All of that is true, every word.
But they regret it because of the things nobody told them — like losing many summer days applying for a permesso di soggiorno instead of relaxing at the beach. I’ve made a dozen articles about how good Italy is, and I still think it’s one of the best places in Europe to retire. And that’s exactly why I’m making this one.
I will show you five reasons that catch Americans, Canadians, and Australians off guard, and why knowing them could completely change your retirement plan. And fair warning — reason one only bites Americans, but the others matter to ALL expats.
Reason One: The Roth IRA Trap
You already paid the tax. That was the whole point of a Roth — you hand the government its money up front, and the withdrawals come out clean for life. Plenty of you converted a traditional bank account to lock in that benefit.
Italy was not at that table. Italy treats you as a tax resident if you spend more than 183 days a year there, register your address in the anagrafe (the town hall’s list of who lives where), or establish what the law calls your centre of vital interests. Any one of those, on its own.
And a resident is taxed on worldwide income, so the accounts you spent thirty years building are now visible to a tax authority. The US–Italy tax treaty was signed in 1984 and updated in 1999. It allocates taxing rights and relieves double taxation. What it does not do is guarantee the tax-free character of Roth distributions.
There is a lot of discussion and grey lines on this matter, so each lawyer says something different. So it is not certain that withdrawing your Roth will be taxed, but it might happen.
The other big problem is the Foreign Tax Credit. Normally, double taxation gets solved there — you pay Italy, and it offsets your American bill on the same income. But since the US does not tax the Roth, there’s no American liability for the Italian tax to cancel out. That mechanism only works when both countries are charging you.
Dividends and capital gains have a flat 26% tax, which is kind of average in the EU and much lower than in Great Britain, for example. Your US index funds are the odd one out: they aren’t classified as stocks under EU rules, so income from them is taxed at progressive rates instead. The most standard American retirement portfolio in existence is, in Italy, tax-inefficient.
Then the wealth taxes. IVIE takes 1.06% of foreign real estate, though property tax paid abroad can be used as a credit. IVAFE takes 0.2% a year on foreign financial assets, plus about €34 for every foreign bank account averaging over €5,000 — yes, per account. And you declare it all in Quadro RW, which doesn’t replace your American reporting.
And don’t lean on the treaty to save you — the US keeps the right to tax its own citizens despite the treaty. Retirees who read a summary and conclude they’re protected are usually reading a provision that gets switched off for them specifically.
But what ruins people is that none of these tax inefficiencies appear in the “Cost of Living Comparison” that other articles do.
Reason Two: The 7% Flat Tax Incentive Lures You Somewhere You Didn’t Want to Live
Italy has this great tax incentive to attract expats to certain parts of the country — a flat 7% on all foreign-source income instead of normal income tax. The incentive is valid for ten years, and during this time the retiree pays just 7% instead of the ordinary rates of 23 to 43% plus surcharges. It also switches off IVIE and IVAFE that I just described, so we are talking about huge tax savings.
But the conditions are where people get caught. You need an actual stable pension — a big portfolio with no pension stream doesn’t qualify, however wealthy you are. You can’t have been an Italian tax resident in the previous five years. You must live in a city below a certain population threshold — in 2026 they raised that ceiling from 20,000 to 30,000 inhabitants. And you must live in one of eight southern regions — Sicily, Calabria, Sardinia, Campania, Basilicata, Abruzzo, Molise, Puglia — or a designated earthquake reconstruction zone.
The increase in the population threshold to 30,000 is very good news, since now there are cities with much better infrastructure that also give you the reduced tax benefit. In another article, I covered some of the best towns that qualify you for this tax benefit in Italy. But one must choose carefully, because you must remember that this special tax regime exists to repopulate places people are leaving, and many of them are leaving for a good reason.
A person whose family is from a village in Calabria told us that:
Young people leave the villages to go to the north, to cities like Milan. Villages are quite dead compared to 20 years ago. Nowadays people aren’t as extroverted anymore. On the positive side, it got much cleaner; it used to have a lot of trash anywhere, it really improved. There are different dialects, the village my dad grew up spoke a mix between Italian and Albanian, but these days it’s not spoken much, people just switched to regular Italian.
There are two other things you should pay attention to. First: this special lower flat tax does not allow deductions for medical expenses, renovation work, or dependents. Second: the regime excludes credit for tax already paid abroad.
One more important issue that Americans face: for a Brit, a Canadian, or an Australian, 7% is 7% — you exit your home tax system on becoming an Italian resident. Americans, however, are one of the two nationalities in the world that pay income tax by citizenship. Of course, you can use the taxes that you paid in Italy as credits when declaring your taxes for the US, which is worth something.
The next obstacle is about a benefit in Italy everyone assumes is free — but it is often not.
Reason Three: Healthcare Is Available, But Not Really Free, and Not Evenly Distributed
Americans arrive expecting European universal healthcare, and the Servizio Sanitario Nazionale is universal — for the usual residents. On an Elective Residence Visa, you are not automatically inside it. You pay no Italian payroll tax, so to enrol in the public healthcare, you must pay.
Since the 2024 reform, non-EU elective residents face a €2,000 minimum contribution, scaling with income to almost €2,800 a year at higher brackets. To get the visa at all, you need private health insurance valid in Italy that covers emergency hospitalisation and repatriation. Then, once the residence permit is in hand, you can enrol in the public system.
Regarding the payment for the public healthcare, remember: it’s annual, and it climbs as your income does — for coverage expats often assume was free. Under the special 7% tax regime, those medical costs are not deductible. And SSN cover stops at the Italian border — fly to Ohio for a grandchild, and you’re uncovered unless you keep a separate policy. On top of that, you still have the co-payments, running up to about €36 for a specialist visit or a prescription.
Now let’s talk about the regional differences in Italy, which are sometimes hilarious, but here, they might be a reason to worry, because Italian healthcare is run regionally, and the regions are extremely different. The Ministero della Salute (or Ministry of Health) scores the regions on the Essential Levels of Assistance — the LEA — across prevention, community care, and hospital care. In the 2023 assessment, 5 regions got low scores in district care, and of these 5, 4 are southern regions. Calabria has repeatedly been the worst performer in the country both in prevention and district care.
And Italians know about such differences, so they act accordingly by moving. There’s a word for it — migrazione sanitaria, medical migration. More than half a million Italians move between regions for treatment every year, and the money moves with them: €3.7 billion in flows, overwhelmingly south to north. Campania loses about €351 million, Calabria €288 million. Lombardy, on the other end, earned €750 million with that.
And the eight regions where the 7% flat tax applies are, with the exception of Puglia, the regions where the health system performs worst. Recent statistics show that 9.9% of Italians — 5.8 million people — gave up on a doctor visit or diagnostic test in 2024, up from 6.3% before the pandemic. Sardinia is the worst at 17.2%. And the rate peaks in the 45-to-54 band, at 13.4% — which is the age of many of you reading this.
So for many retirees, the best solution is to rely on private healthcare. If you’re weighing Italy against other Mediterranean options, it’s worth reading our comparison of retirement in Greece versus Italy.
Reason Four: The Renovations That Ate the Retirement
Imagine you have the chance to buy a house for one euro — how bad can it get? The one euro is only the entry ticket. The 1 euro programmes started in Salemi, Sicily, in 2008, and now run in more than seventy municipalities, mostly in the rural south and the islands. They’re municipal, not national — every comune sets its own rules, deposit, deadlines, and property list. There’s no central portal, and no guarantee you get a house at all.
What you’re signing: a security deposit or bond, typically €2,000 to €10,000, forfeited if you don’t renovate on schedule. The renovation deadline is usually three years from the deed, with work starting often within twelve months. Mussomeli, for example, requires a €5,000 deposit that you lose if you don’t renovate the 1 euro home you bought. Cinquefrondi swaps the deposit for an annual insurance policy around €250, with a penalty near €20,000 for non-compliance.
In terms of the costs, here is a brief breakdown of what your 1 euro home will cost you: notary, registration and agency fees up to €10,000; professional fees like architect and geometra, €5,000 to €15,000; a structural engineering survey, around €2,000; and the renovation work itself, from €20,000 to €100,000. For a modest two-bedroom village house, a basic functional restoration is generally quoted at €50,000 to €75,000 all in — about US$56,000 to US$85,000. If you want to upscale and put in modern systems and real insulation, which will save on utility bills later, you might end up spending more than €90,000.
In fairness, some towns like Mussomeli or Sambuca di Sicilia have an average renovation cost much lower, at around €35,000, so it can be done cheaply. What you must remember about these 1 euro properties is that these places have stood empty for decades — roof, wiring, plumbing, heating, kitchen, typically absent or unsafe. And since they are very old, all the renovations can be slowed down by heritage rules and regulations.
Fine, you think, since Italy subsidises renovations. Yes, it does. For 2026 the bonus ristrutturazioni gives a 50% deduction on a primary residence, capped at €96,000 of spending, and 36% on second homes. From 2027 those fall to 36% and 30%. From 2028, only a 30% renovation bonus is expected to remain. The Superbonus ended definitively on 1 January 2026.
And these deductions are to be claimed in ten equal annual instalments. So to collect the full benefit you need ten years of Italian income tax declarations big enough to absorb them. Under the 7% flat tax, that is unlikely. The same choice you made to pay a lower income tax rate forfeited a 50% subsidy on your renovation.
Then, let’s say that after renovating it, you want to sell it. Rural properties in southern Italy are illiquid — the depopulation issue is the reason for the €1 programme, so don’t expect a queue to buy your property after renovation. A renovated two-bedroom village house on the open market often sells for €45,000 to €65,000, or US$50,000 to US$73,000. So the 1 euro house, which will end up costing you more than €70,000, with a deadline to end renovations, is frequently the more expensive path. And the real obstacle isn’t only the money. For a deeper look at whether these deals make sense, see our full breakdown of 1 euro homes in Italy.
Which leads us to the last reason that sends people home.
Reason Five: Piles of Paper — The Permesso di Soggiorno
The thing I mentioned at the beginning. The thing that might make you spend many summer days in a queue instead of at the beach. Calling the whole process to obtain it “bureaucratic” is an understatement.
It starts with the visa, applied for at the consulate in your country of residence — better not try to arrive as a tourist and apply for it in Italy; authorities often reject that. Then you fill the kit postale at a Sportello Amico post office to apply for the permesso di soggiorno, your residence permit. Then the Questura appointment for fingerprints, then a second trip to collect the card. Codice fiscale, your tax number. Anagrafe registration. ASL registration. The health contribution by F24. SPID, the digital identity you need to talk to any Italian administrative system. And when you need to renew your permesso di soggiorno, you need to do all that again.
Timelines depend on local immigration pressure more than city size. A quiet provincial questura might turn a file around in weeks. In big cities like Rome it can take more than half a year. If it takes too long, you can file a sollecito — a formal reminder — after 60 days, then escalate to the Prefettura or the courts. In big cities a lot of people need to do that since it is so slow.
Two costs accumulate quietly. The financial one: an immigration lawyer, a commercialista (which is kind of an accountant), a geometra if you’re renovating, sworn translators, and so on. And many of those are recurring costs that you pay every time you renew your residency card.
But then, there is also the time cost. Not only do you spend a lot of time dealing with this, but also you can’t easily leave the country mid-renewal. And if you don’t speak any Italian, it gets much worse. Acculturative stress — the strain of living inside a culture you haven’t absorbed — is hard, I know how it is, because every time I moved from one country to the other, I faced this. The quicker you learn the language, the better it will be, and there are some methods that are very efficient for language learning after 50 years old.
Because language barriers with neighbours keep you isolated. Unfortunately, some foreigners respond by forming dense expat enclaves, which helps with loneliness but makes integration harder.
I understand their side. You spent thirty years being visibly competent — running teams, closing deals, fixing problems, handling institutions. And suddenly in Italy, none of those skills you have are very useful. Most bureaucratic interactions happen in a language you barely speak, under rules you can’t predict, on a timeline you can’t influence.
Some people who gave up on Italy will tell you the taxes were worse than expected, or the hospital was too far, or the renovation ran over. All might be true. But the thing that tips the decision toward going home is usually that one person stopped feeling like himself. And that never shows up in a budget.
Said all that, Italy is still one of the best destinations in Europe for anyone who wants a relaxed pace and a healthy lifestyle. And you can buy a nice home there for the price of a parking space in the US.
Not sure Italy is the right fit? See our full guide on where to move abroad.
Levi Borba is the founder of expatriateconsultancy.com, creator of the YouTube channel The Expat, and a best-selling author. Some of the links in our articles may be affiliated links, meaning the author earns a small commission if you make a purchase.
