The Revenue Agency, through its official online magazine, once again addresses a particular case regarding restructuring bonuses. The situation resolved and clarified again concerns the case of a property undergoing renovation works. The owner enjoys the relevant 50% deduction for the costs of the works (so-called renovation bonus). Unfortunately, during one of the 10 years in which the deduction is spreadable, the owner passes away due to death. Therefore, according to the general rule, the heirs take over for the remaining installments.
The Financial Administration makes it clear whether the deduction installment relating to the year of death must be attributed to the deceased or to the heirs who take over.
The topic covered, therefore, is related to the management of the residual installments of the tax deduction in the event of death of the owner of the property during the ten-year period of enjoyment of the tax benefit.
Death in the restructuring bonus: general rule
The renovation bonus, we remind you, provides for a 50% deduction of the expenses incurred for the renovation of a property, divided into ten annual installments of the same amount. However, doubts always arise as to how to manage the remaining installments in the event that the beneficiary of the deduction passes away before the end of the ten-year period.
The Revenue Agency firstly reiterated that, in the event of the death of the owner of the property, the residual deduction installments are transferred to the heirs. This transfer occurs provided that the heirs meet specific requirements. In fact, they must maintain “material and direct possession of the property”, even if they do not necessarily use it as their main residence. This requirement does not only apply to the year in which the inheritance is accepted, but must be met for each year in which you wish to take advantage of the deduction.
If the ownership of the property is held only by an heir, the residual deduction shares pass entirely to them.
If, however, the possession is retained by multiple heirs, the residual shares of deductions pass (are divided) in equal parts between them.
Renovation bonus: who receives the deduction in the year of death
The situation is further clarified by specifying that the portion of the deduction referring to the year of the owner’s death is transferred to the heirs, in accordance with the general rule. This rule states that, to determine who is entitled to the deduction for a given year, it is necessary to identify the taxpayer who owned the property on December 31 of that year. If, therefore, the death occurred in October 2023, the portion of the deduction referring to 2023 must be enjoyed by the heirs who are new holders on 31 December 2023. The enjoyment of said portion is in 730/2024 (tax year 2023) .
The return of the Revenue Agency on the issue is of particular relevance to avoid misunderstandings and errors in the management of tax deductions linked to renovation works, especially in delicate situations such as the death of the owner of the property. The heirs, therefore, must be well aware of the requirements necessary to maintain the right to deduct the remaining installments, thus ensuring correct application of the tax regulations in force.
This is essentially what has already been reiterated several times by the Revenue Agency in the circular on building bonuses (Circular no. 17/E of 2023).
Conclusions
In conclusion, the Revenue Agency reiterates the importance of correct management of successions and the related tax breaks. The transfer of the remaining installments of the deduction for renovation works, in fact, can represent a significant advantage for the heirs. As long as they comply with the conditions established by law.
To learn more, the heirs must remember that the material and direct possession of the property is a fundamental requirement to maintain the right to deduction. This means that they must be able to dispose of the property, even if it is not used as a primary residence.
The legislation also establishes that this condition must be maintained not only in the year in which the inheritance was accepted, but for each year in which it is intended to benefit from the deduction.
The possession of the property must be continuous and documentable. And heirs must be prepared to demonstrate their eligibility to benefit from the remaining installments of the deduction.
Summing up…
- the Revenue Agency returns, through its online magazine, to clarify the transfer of the residual installments of the restructuring deduction
- the remaining installments pass to the heirs if they meet specific requirements
- the heirs must maintain “material and direct possession of the property”
- the possession of the property must be continuous for each year of deduction
- the portion of the deduction for the year of death is transferred to the heirs.
