Yes. If you live in Italy as a tax resident, Italy taxes your US Social Security benefits under Article 18 of the US-Italy tax treaty, which gives your country of residence the primary right to tax those payments.1U.S. Department of the Treasury. Convention Between the Government of the United States of America and the Government of the Italian Republic for the Avoidance of Double Taxation If you’re a US citizen, the US taxes them too under the treaty’s saving clause. Foreign tax credits on both returns are what keep you from paying the full bill twice.
What the Treaty Actually Says
Article 18, paragraph 2 states that Social Security payments made by one country to a resident of the other “shall be taxable only in” the recipient’s country of residence.1U.S. Department of the Treasury. Convention Between the Government of the United States of America and the Government of the Italian Republic for the Avoidance of Double Taxation The Italian Ministry of Finance reads it the same way: if the beneficiary resides in Italy, the payments are taxable only in Italy.2Ministero dell’Economia e delle Finanze. Convenzione Italia-USA – Articolo 18
Then comes the catch for Americans. Article 1 contains a “saving clause” letting the United States tax its own citizens and long-term residents as if the treaty didn’t exist.1U.S. Department of the Treasury. Convention Between the Government of the United States of America and the Government of the Italian Republic for the Avoidance of Double Taxation A handful of treaty articles are carved out as exceptions. Social Security under Article 18(2) is not one of them. The only Article 18 exceptions cover alimony, child support, and pension contributions during temporary work assignments.
So for a US citizen retiree in Italy, both countries claim taxing rights on the same benefit. Italy taxes because the treaty gives it the primary right. The US taxes because the saving clause overrides the treaty for its citizens. If you’re not a US citizen or Green Card holder, only Italy taxes the benefit and the standard 30% nonresident alien withholding shouldn’t apply.
How Italy Taxes Your Benefits
Italy folds your Social Security into your worldwide income and applies IRPEF, the progressive national income tax. The brackets:3Agenzia delle Entrate. Personal Income Tax Rates and Calculation
- Up to €28,000: 23%
- €28,001 to €50,000: 35%
- Above €50,000: 43%
Your benefits stack on top of any other Italian-source income when determining your bracket. Someone with $30,000 in Social Security and nothing else would sit mostly in the 23% band after currency conversion; add a pension or investment income and you climb quickly.
You declare the income on either the Modello 730 (a simplified form for employees and pensioners) or the Modello Redditi PF. Even though the treaty gives Italy the taxing right, you still have to actively declare the income and separately claim credit for any US tax paid on it. Keep your US tax transcripts with your Italian filings; the Agenzia delle Entrate can ask for proof of US tax paid before granting credit relief.
To claim treaty benefits, Italian tax offices sometimes request a US residency certification. The IRS issues this on Form 6166 after you submit Form 8802 and pay the processing fee.4Internal Revenue Service. Certification of U.S. Residency for Tax Treaty Purposes
How the US Still Taxes You
Because the saving clause preserves US taxing rights over citizens, your benefits stay subject to the same rules that apply to any American. Internal Revenue Code Section 86 uses a “provisional income” test to decide how much of the benefit is taxable.5Office of the Law Revision Counsel. 26 USC 86 – Social Security and Tier 1 Railroad Retirement Benefits Provisional income is your modified adjusted gross income plus half of your Social Security.
- Single, provisional income $25,000–$34,000: up to 50% of benefits taxable
- Single, above $34,000: up to 85% taxable
- Joint, $32,000–$44,000: up to 50% taxable
- Joint, above $44,000: up to 85% taxable
These thresholds haven’t been adjusted for inflation since the 1990s, so most retirees with any meaningful income beyond Social Security land in the 85% inclusion bracket.5Office of the Law Revision Counsel. 26 USC 86 – Social Security and Tier 1 Railroad Retirement Benefits The included portion is taxed at the usual US rates on Form 1040, which you keep filing regardless of where you live.
One common misconception worth clearing up. The Foreign Earned Income Exclusion, which lets US expats exclude up to $132,900 of foreign earned income in 2026, does not apply to Social Security.6Internal Revenue Service. Figuring the Foreign Earned Income Exclusion Social Security is unearned income, so Form 2555 won’t shield it. It can reduce US tax on wages or self-employment income earned in Italy, which indirectly lowers your provisional income, but the benefits themselves stay in the calculation.
Using Foreign Tax Credits To Avoid Paying Twice
Because both countries tax the same benefit for US citizens, Article 23 of the treaty is where the relief lives. Both sides provide foreign tax credits.1U.S. Department of the Treasury. Convention Between the Government of the United States of America and the Government of the Italian Republic for the Avoidance of Double Taxation
On the US side, you file Form 1116 with your 1040 to claim the Foreign Tax Credit for Italian income tax paid on the same benefits. It’s a dollar-for-dollar reduction, but it’s capped at the US tax that would otherwise be owed on that foreign-source income.7Internal Revenue Service. 8Italia.it. Tax Breaks for Moving to the Charming Villages of Central Apennines and Southern Italy To qualify:
- The municipality must have fewer than 20,000 inhabitants and sit in Sicily, Calabria, Sardinia, Campania, Basilicata, Abruzzo, Molise, Puglia, or certain earthquake-affected areas in central Italy.
- You must not have been an Italian tax resident for at least the previous five years.
- You must receive pension or similar retirement income from a foreign source.
The 7% substitute tax replaces IRPEF entirely for the covered income, so your US Social Security, private pensions, and non-Italian investment income are all taxed at the flat rate. The regime runs up to 10 years from the date you establish Italian residency, and you can revoke the election earlier if circumstances change.
Reporting Obligations You Cannot Skip
Living in Italy with US financial ties triggers filings on both sides that go beyond your income tax returns. Penalties for missing them can dwarf any tax you actually owe.
On the US Side
If your Italian financial accounts combined exceed $10,000 at any point during the year, you must file FinCEN Form 114 (the FBAR) by April 15, with an automatic extension to October 15.9FinCEN. Report Foreign Bank and Financial Accounts It’s filed electronically through the BSA E-Filing system, separately from your tax return. Penalties for willful failure can reach $100,000 or 50% of the account balance per violation.
Under FATCA, you may also need Form 8938 with your 1040 if foreign financial assets exceed $200,000 on the last day of the tax year or $300,000 at any point, for single filers living abroad. Joint filers have thresholds of $400,000 and $600,000.10Internal Revenue Service. Summary of FATCA Reporting for U.S. Taxpayers FBAR and Form 8938 aren’t mutually exclusive; you may need both.
You generally don’t need to file Form 8833 to disclose your treaty position on Social Security. That formal disclosure is only required for dual-resident taxpayers claiming treaty benefits as an Italian resident on Form 1040-NR.11Internal Revenue Service. Form 8833 Treaty-Based Return Position Disclosure
On the Italian Side
Italian tax residents disclose foreign financial assets in a section of the tax return called Quadro RW. If the maximum total value at any single financial institution exceeded €15,000 during the year, those accounts must be reported. Italy also imposes IVAFE, a small wealth tax of €34.20 per account when the average balance exceeds €5,000. Values convert to euros using the Bank of Italy’s December 31 exchange rate. Quadro RW follows your tax return deadline: generally September 30 for the Modello 730, October 31 for the Modello Redditi PF.
One Thing That Does Not Follow You: Medicare
Medicare does not cover healthcare services outside the United States. To use Medicare after moving to Italy, you’d have to return to the US for care.12Medicare.gov. Avoid Late Enrollment Penalties If you delay Part B enrollment because you’re not using it, you face a permanent late enrollment penalty of 10% added to your premium for each full 12-month period you could have signed up but didn’t. Some expats keep Part B as insurance against eventually returning to the US; others drop it and accept the penalty risk, relying on Italy’s Servizio Sanitario Nazionale (available to legal residents) plus private Italian coverage.