We are looking at living/retiring in Italy for a 'short' period of time (5-7 years) moving from the US. I am reading articles relating to taxes - and they are a bit scary. Our plan is to use the sale of our home (up to $250K is tax free according to US IRS rules) along with at least one Social Security Pension.
If we are budgeting to spend around $40k annually to live in Italy, what 'income' is taxed? Would it be the Social Security Pension and/or proceeds from the sale of our home? I understand how/if the Social Security gets taxed as it is a form of pension (although I've read about Military, Social Security, etc. being taxed only through USA IRS rules - exempt from the Worldwide income rule). My concern is that in the US, the proceeds from our home sale would not be taxed, but would it be subject to tax in Italy if we are to use it for living expenses? Being able to access $250K without tax consequences is much different then potentially accessed 33-45%.
I realize that taxes is a complicated subject, but if there is a standard answer - it would be most helpful in determining what funds can/should be used or if the move is even feasible.
Thank you in advance.