Hello everyone.
I've been googling until my fingers hurt, both on Italian as well as American portals, to figure out how much tax the Italian Government charges on American retirees in Italy who only have Social Security as their income?
The US - IRS portal refers users to the American Embassy in Italy for this. The American Embassy in Italy writes back that that is a question which needs to be answered by the American IRS ... which of course doesn't make any sense to me since the American IRS is not responsible for taxation in Italy.
I have found perhaps a dozen portals which talk about taxation for private as well es public pensions. But none of those articles fully explain the difference between the two. I even found a page that does explain the differences, but without fully explaining in which of the two categories an American Social Security pension belongs. How can it be so difficult to find this out?
The scenario ...
My wife and I wish to retire in Italy. We're legally old enough to retire, we have no jobs, and once we sell our home we won't have any assets either. From the proceeds of our home we will purchase a home in Italy for us to live in. So Italy will be our primary country of residence and the home there will be the only home which we own. We have no private pensions and no financial investments.
American Social Security benefits are 100% our only income.
We don't plan on living in one of the 7% regions either. What happens if you live more than ten years? No, we plan on residing near Venezia / Camponogara, which has no special rules for retirees and their income. But we can't even begin to figure out if this will be affordable to us, until we find out how much taxes the Italian Government takes away from American Social Security benefits?
Our monthly benefits are apx. 1650 Euros every month.
We can easily live with that since there are no children.
We've heard horror stories of 27% taxation on income. Well, when you take away 27% from the 1650 Euros that we receive every month, then life in Italy becomes impossible for us.
We've also heard horror stories about no free, untaxable amount, as is customary in the US, Canada, and many European Countries. Is this true? Every penny of regular income is being taxed by the Italian Government, even if the retiree or wage earner makes less than 10.000 or 20.000 Euros per year?
It would be great to hear from someone who resides in Italy, an American who resides there while living on their own American social Security.
Thank you.