First-home tax relief: what happens if you sell within five years of purchase

Buying a home with first-home tax relief means paying reduced taxes compared with an ordinary purchase. In return, the law imposes certain conditions to be met over time: among them, a prohibition on transferring the property before five years have passed from the date of the deed, unless you purchase a new property to use as your main residence within a set period. Anyone who fails to meet these conditions risks forfeiting the relief, resulting in a demand for payment of the taxes saved, plus interest and an additional penalty.

What forfeiture of the first-home tax relief means

Forfeiture occurs when the conditions that allowed access to the relief no longer apply. In the case of an early sale, the Italian Revenue Agency may demand the difference between the taxes actually paid at the time of purchase and those that would have been due without the relief, plus statutory interest and a penalty calculated as a percentage of the taxes recovered. Generally speaking, the total amount can be significant, so it is wise to weigh the costs carefully before proceeding with the sale.

The exception: buying again within one year

The law provides a way out: if, after selling the home within the five-year period, you purchase another property to use as your main residence within one year of the sale, the relief is not forfeited. This mechanism is designed for those who, for work, family or other pressing reasons, need to move before the five years are up. However, for the exemption to apply, the new purchase must meet the first-home requirements and take place within the prescribed period. It is always advisable to check the details with a notary or an accountant, as proper documentation and the sequence of the deeds are decisive.

What you actually stand to lose

The calculation of the amounts due in the event of forfeiture depends on the type of transaction (purchase from a private seller or from a developer), the taxable base and the rates in force at the time of the original deed. Broadly speaking, three items make up the Revenue Agency's demand:

• The difference between the reduced tax paid and the ordinary tax that should have been paid.
• Statutory interest calculated from the date of the original deed until notification of the payment notice.
• A penalty calculated as a percentage of the taxes recovered, which can normally be reduced through voluntary correction ("ravvedimento operoso") if you regularise your position spontaneously before receiving an assessment.

Voluntary correction: better to act early

If you have already sold and realise you have not met the conditions, you can regularise your position voluntarily before the Revenue Agency opens an audit. Voluntary correction allows you to pay the amounts due with reduced penalties compared with those applied in the event of an assessment. The deadlines and procedures vary depending on how much time has passed since the breach: the sooner you act, the lower the additional amount generally is. An accountant can calculate the exact figure and handle the paperwork.

What to consider before deciding

Before putting a property purchased with the first-home tax relief on the market, it is worth making a comparative estimate: how much do you save by postponing the sale until the five-year mark, compared with selling right away? In some cases, if the expected gain from the sale is substantial, it may be worth bearing the cost of the forfeiture. In others, waiting a few months is the more sensible choice. In the Umbrian market, where selling times vary widely between hillside villages and better-connected areas such as Todi, planning ahead also gives you more room for manoeuvre on the commercial side.

If you are considering selling a property purchased with first-home tax relief in Todi or the surrounding area, our team is available to discuss the local market context. For tax and notarial matters, we will point you towards the most suitable professionals: every situation has its own specifics, and dedicated advice is always the safest route.