Mortgage interest deduction when you move home: what the rules provide

You are selling your main home and considering buying another with a new mortgage — or you are transferring your existing mortgage to the new property. In both cases, you are wondering whether you will still be able to deduct the mortgage interest in your tax return. The answer depends on a few specific conditions that are worth knowing before signing any deed.

The mortgage interest deduction: the basic requirement

Italian tax law generally allows you to deduct a percentage of the interest paid on a mortgage loan, provided the financing is used to purchase your main home — that is, the property where the taxpayer habitually resides. The benefit applies only to a first home used as your primary residence, not to second homes or income-generating properties.

For the deduction to be granted, the borrower must normally transfer their residence to the property within a legally established period from the purchase. Those who fail to meet this condition lose the right to the deduction for the years in which the requirement is not satisfied.

What happens if you sell and buy a new home

When you sell your main home and buy another property with a new mortgage, the interest deduction on the new loan is generally allowed, provided the new property becomes your main residence within the prescribed time limits. Having already benefited from the deduction on your first home does not prevent you from claiming it on the second.

Be careful, however, about the transition period: if months pass between the sale and the new purchase during which you do not own any main residence, you could find yourself in a grey area. The actual timing of each step — the sale, the deed for the new purchase, the transfer of residence — has a concrete impact on the calculation.

The case of an existing mortgage transferred to the new home

In some cases it is possible to renegotiate the existing mortgage or transfer it to the replacement property, maintaining the continuity of the financing. As a rule, if the mortgage is restructured or replaced with a new one, the deduction applies only to the portion of interest attributable to the outstanding principal of the original mortgage, not to any additional amount. Sums exceeding that threshold do not enjoy the same tax treatment.

The conditions to meet so you don't lose the benefit

• The mortgage must be secured by the property and taken out for its purchase (not for renovation or liquidity purposes, except under specific rules).
• The purchased property must become your main residence within the legal deadline from the date of the deed.
• If you have sold your previous main home, you normally have a window of time to purchase and transfer your residence to the new home without losing the continuity of the benefit — check the exact deadline with an accountant.
• The deduction applies up to a maximum amount of interest set by law: it is not unlimited.
• In the case of a joint mortgage, each co-holder is entitled to their own share of the deduction, provided they are also a co-owner of the property and use it as their main residence.

What to check before proceeding

Before selling or signing the mortgage agreement for the new home, it is worth consulting an accountant or your bank to simulate the tax effects of the transaction as a whole. The variables at play — the timing of the deeds, the structure of the mortgage, the outstanding amount, the composition of your household — can significantly affect the amount that is actually deductible each year. Tax legislation is subject to change, so up-to-date guidance should always be sought in the instructions issued by the Italian Revenue Agency or from a qualified professional.

If you are considering a purchase in the Todi area or elsewhere in Umbria and want to understand how to structure the transaction from a tax perspective as well, our team is available for an initial consultation: we support our clients not only in finding the right property, but also in coordinating with local notaries and advisors.