Italy is preparing to change how it taxes rental income, and the change under discussion is a big one. Ahead of the 2027 budget, the governing coalition is weighing a flat 5 per cent tax on the rent from long-term residential lets, down from the 21 per cent that applies today. Its aim, reported on 6 October, is to make a long contract worth more to a landlord than a short one.
Nothing has been approved. Its rate, the leases it would cover, any age or income limits on tenants and the funding all still have to be written into the budget law, and the proposals are coming from several parties at once. But the direction is clear enough to be worth explaining to a client now, because it touches the arithmetic behind every rented flat in the country.
Italy May Cut Tax on Long-Term Rents to 5 Per Cent
The measure doing the rounds is a reduced version of the cedolare secca, Italy’s flat substitute tax on residential rent. Parties on both sides of parliament have put housing proposals on the table before the budget, and the centre-right majority has floated a rate of 5 per cent for long-term lets, aimed at families and young tenants, according to reporting by The Local Italy and Il Giornale d’Italia. Officials have not said which contracts would qualify or how long a lease would have to run.
Two other ideas sit beside it. One is to make short tourist lets less advantageous, to push some of that supply back toward ordinary renters. The other, from the opposition, is a national plan for public housing and a return of the 65 per cent deduction for energy renovations. It’s the budget law, not the speeches, where any of this becomes real.
- Long-term residential lets: a flat 5 per cent rate is under discussion
- Short tourist lets: the debate includes making them less attractive
- Public housing: the opposition wants a national building plan
- Energy renovations: a 65 per cent deduction is back on the table
The Rental Crisis Behind Italy’s Budget Row
The reason this is on the agenda is that renting in Italy’s cities has become an emergency in its own right. The housing market is now one of the sharpest political issues in the country, and rents are where it hurts most. Figures reported by La Repubblica and carried by The Local Italy put at least seven million people in serious difficulty, with more than a third of their income going on rent or a mortgage, and three million of them spending 40 per cent or more.
The squeeze lands hardest on workers who earn too much for public housing but too little for the open market, the so-called fascia grigia. In large cities they make up 30 to 35 per cent of the workforce, and the tenant union SUNIA says that in some districts rent alone swallows more than half a salary. Teachers on temporary posts, nurses living away from home and separated parents are the faces of it, often back in shared flats they thought they had left behind in their twenties.
What a Five Per Cent Flat Tax Would Change
Today the cedolare secca is an option for individual landlords who rent out a home. The tax agency sets the substitute tax at 21 per cent of the annual rent for a free-market contract, and at 10 per cent for a canone concordato, the agreed-rent lease registered with the local authority. Choosing it means giving up the right to raise the rent each year, including the ISTAT index, and it removes the registration and stamp duties.
Under the plan, the free-market rate would fall to 5 per cent. On a flat rented for 12,000 euros a year, the tax would fall from about 2,520 euros to 600, a saving of 1,920 euros for the landlord. That is the kind of number that changes behaviour, which is the point: the government wants owners to prefer a stable tenant over a stream of weekend guests. Whether it works depends entirely on the conditions attached, and a lower tax on the landlord does not by itself lower the rent that a tenant pays.
| Lease type | Rate today | On the table | What it would mean |
|---|---|---|---|
| Free-market long let | 21 per cent | 5 per cent | A cut, if it passes and the conditions fit |
| Agreed-rent let | 10 per cent | No change floated | Already the cheapest rung for landlords |
| Short let, first flat | 21 per cent | Talk of a worse deal | The aim is to shift supply to long lets |
| Short let, second flat | 26 per cent | Talk of a worse deal | A second flat is already taxed harder |
What Agents Should Tell Clients About This
Treat it as a live proposal, not a rule. If a client is deciding this month whether to let long or short, the sensible move is to model both under today’s rates and leave room in the plan for a change that may or may not arrive.
What is worth flagging now is the direction. Italy has already tightened the short-let regime, and a budget that rewards long leases would make the long-term let the more obvious choice for a hands-off owner. For an agent, that is a conversation to start early, not a contract to rewrite on a rumour.
- Quote today’s 21 per cent and 10 per cent rates, and label the 5 per cent as a proposal
- Run the landlord’s numbers both ways before recommending a long or a short let
- Watch the contract conditions the budget sets, since lease length and tenant rules decide the benefit
- Explain that giving up the annual rent indexation is the price of the cedolare secca
- Remember the 2026 rule that caps short-let cedolare secca at two apartments per owner
What Happens Next as Italy’s Budget Takes Shape
Everything now waits on the budget itself. It has to be drafted, sent to parliament and passed by the end of the year, and the housing chapter is one of the contested parts. A measure that has been floated can still be dropped, watered down or widened before it is written down.
For anyone with a stake in the Italian rental market, the practical position is unchanged today and could be different by January. Watch the draft text, not the interviews, and remember that a tax cut for landlords and cheaper rent for tenants are two separate promises.
Questions Agents Ask About Italy’s Rental Tax
The detail is still moving, but the shape of the change is already clear enough to answer the questions clients are asking.
Is the 5 per cent tax on Italian rents already law?
No. It is one of several proposals in the debate ahead of the 2027 budget, reported on 6 October 2026, and it still has to be written into the budget law and approved by parliament. Until that happens, the cedolare secca rate stays at 21 per cent for free-market contracts and 10 per cent for agreed-rent ones.
What is the cedolare secca?
It’s an optional flat tax for individual landlords who let out a home. The tax agency applies 21 per cent to free-market rent and 10 per cent to agreed-rent leases, and in return the landlord gives up the annual rent indexation and pays no registration or stamp duty.
Would a lower tax bring rents down?
Not on its own. Cutting the tax raises what a landlord keeps, which is meant to tempt owners into long leases and add supply. Whether tenants pay less depends on how much new supply appears and on the conditions tied to the rate.
How are short-term lets taxed in Italy?
Short tourist lets use the same cedolare secca, at 21 per cent for the first flat a landlord lets this way and 26 per cent for a second. From 2026 an owner can use the regime for no more than two apartments, down from four, which already narrows the gap with long lets.
Which landlords would gain most?
Ones who already rent long-term on the open market, since they pay 21 per cent today. An owner on an agreed-rent lease pays 10 per cent, so the proposed 5 per cent would matter less, and nothing in the debate suggests a better deal for short lets.
