1) 2017 Sismabonus: rules, percentages, timeframes, seismic zones and expenses established by the Budget Law
Following the terrible earthquakes that struck Central Italy over the past few months, the Government decided to intervene by revising the Sismabonus, i.e. the IRPEF tax deduction on expenses incurred for the seismic upgrading of existing buildings, as provided for by Law No. 90 of 3 August 2013.
The deduction percentage will range from 50% to 85%, but it will not remain fixed as previously envisaged. The incentive will in fact apply to expenses incurred from 1 January 2017 to 31 December 2021, a five-year extension intended to give citizens more time to bring their homes into compliance with existing seismic safety standards.
Sismabonus: how it works
Starting from 1 January 2017, those carrying out works on buildings used as residential properties (both primary and second homes), as well as buildings used for business activities, aimed at improving their seismic safety, will be entitled to an IRPEF deduction of 50%, up to a maximum expenditure limit of €96,000 per property unit for each year.
In this case, however, the timeframe changes: the deduction will be divided into five equal annual instalments, rather than ten as previously established and as provided for under the other home improvement incentives.
Sismabonus: the most important changes
As stated above, the deduction percentage will vary according to certain parameters discussed below.
First, however, it should be specified that, pursuant to Article 2 of the 2017 Budget Law, from 1 January 2017 until 31 December 2021, the Sismabonus will apply not only to buildings located in areas considered to have high seismic risk, namely those classified as seismic zones 1 and 2 under Prime Ministerial Order No. 3274/2003, itself based on the classification carried out by INGV, but also to buildings located in seismic zone 3, i.e. areas subject to more moderate seismic shaking than the higher-risk zones.
Sismabonus: amount of the deduction
In general, residential buildings and buildings used for business activities will qualify for a 50% deduction, with an expenditure ceiling of €96,000.
However, the deductible percentage varies according to the result achieved following the seismic upgrading works. If the works result in an improvement of one building risk class, the deduction will increase to 70%. If, on the other hand, the seismic upgrading works allow the building to improve by two risk classes, thus achieving greater seismic safety, the beneficiary will be entitled to deduct 80% of the expenses incurred.
The risk classes will be determined by a decree of the Ministry of Infrastructure, headed by Graziano Delrio, which must be adopted by 28 February 2017. The same measure will also establish the procedures through which qualified professionals must certify the effectiveness of the works carried out.
Sismabonus: condominiums
If the works concern not individual residential units but the common parts of condominium buildings, the deductible percentage increases further. The Sismabonus will reach 75% if the works result in an improvement by one risk class, while it will increase to 85% for works on condominium buildings that result in an improvement by two risk classes.
In this case, the maximum eligible expenditure is €96,000 multiplied by the number of property units in the building.
Condominium owners falling within the no-tax area may transfer their tax deduction to the suppliers who carried out the works. The procedures for transferring the tax incentive by taxpayers with insufficient taxable income will subsequently be detailed in a measure issued by the Italian Revenue Agency.
For these works, furthermore, according to the 2017 Budget Law, “beneficiaries may opt to transfer the corresponding tax credit to the suppliers who carried out the works as well as to private entities, with the possibility of subsequent transfer of the credit. Transfer to credit institutions and financial intermediaries remains excluded.” In other words, the same rule established for the Ecobonus applies.
The procedures for transferring the incentive by taxpayers with insufficient taxable income will be established by a measure of the Italian Revenue Agency to be adopted within sixty days from the date on which the Budget Law enters into force.
Sismabonus: deductible expenses
There is also a new provision regarding deductible expenses: starting from 1 January 2017, these expenses also include the costs incurred for the seismic classification and seismic assessment of buildings.
2) 2017 Home Tax Deductions: Renovation Bonus
The building renovation bonus is included among the 2017 home-related tax deductions that will be extended by the new Stability Law, together with the Ecobonus and the new Sismabonus incentive.
It should be recalled that the 50% deduction for building renovation works, which was in force until 31 December 2016, has been extended throughout 2017.
The home renovation bonus, available to taxpayers including those not resident in Italy, allows taxpayers to deduct from IRPEF 50% of the expenses incurred for renovation works on residential properties, up to an expenditure limit of €96,000 per property unit.
3) 2017 Tax Deductions: Ecobonus
Ecobonus 2017
The 2017 Stability Law confirmed the incentive for energy-efficiency improvements for another year and introduced significant changes.
Therefore, until 31 December 2017, taxpayers may continue to benefit from the IRPEF or IRES deduction.
The Ecobonus is set at 65%, while the deduction for building renovation works is 50%. The deduction for expenses relating to the purchase of furniture and household appliances may be limited to renovation works started in 2016 and continued in 2017.
Below are all the new provisions introduced regarding energy-efficiency improvements and the Sismabonus, the maximum eligible expenditure thresholds, how the deduction works, and the types of work eligible for the Ecobonus in order to improve the energy efficiency of an existing building, whether it is a private residence, condominium property or property used by a company, business or self-employed professional.
2017 Stability Law: Ecobonus, renovations and furniture
The 2017 Stability Law confirmed the following:
65% Ecobonus for energy-efficiency works on buildings;
Sismabonus;
2017 condominium bonus;
50% IRPEF deduction for building renovation works;
bonus for the purchase of furniture and household appliances, probably limited to renovations started in 2016 and continued in 2017.
For 2017, the new deadline for the energy-efficiency expenditure deduction, known as the Ecobonus, is 31 December 2017, also applying to expenses incurred for works on common parts of condominium buildings.
After 31 December 2017, the two deductions will return to the ordinary incentive levels.
The Government’s decision to confirm and extend the two IRPEF deductions throughout 2017 was welcomed both by taxpayers and by those working in the sector, given that ENEA data report thousands of Ecobonus deduction applications submitted since 2013.
However, the new 2017 Budget Law introduced other very important changes.
From 1 January 2017 to 31 December 2021, the 2017 Ecobonus applies where energy-efficiency works are carried out on the common parts of condominium buildings and affect the building envelope over more than 25% of the gross dispersing surface area of the building. In such cases, a 70% Ecobonus deduction applies.
If, in addition, works are carried out on the condominium building to improve summer and winter energy performance to a level at least equal to the average performance established by the Decree of the Ministry of Economic Development of 26 June 2015, published in Official Gazette No. 162 of 15 July 2015, an Ecobonus deduction of 75% will apply.
ENEA will be responsible for carrying out random inspections of declarations relating to the works performed.
Furthermore, starting from 1 January 2017, another important change is introduced for condominiums: the possibility of transferring to third parties the tax credit deriving from the Ecobonus, directly to the suppliers who carried out the works as well as to private entities, with the possibility of subsequent transfer.
What is the 65% Ecobonus 2017 and how does the deduction work?
The 65% Ecobonus 2017 is a tax incentive available to taxpayers who incur expenses for energy-efficiency improvement works on their homes, condominium buildings or offices, shops and industrial buildings.
The incentive consists of a deduction from IRPEF where the expense is incurred by a private taxpayer, or from IRES where it is incurred by a company or business. The State grants this deduction when works are carried out to improve the energy efficiency of existing buildings.
Eligible and deductible expenses include those incurred to:
reduce energy demand for heating;
improve heat retention within the building, for example through flooring, windows and frames or insulation;
install solar panels;
replace winter heating systems.
The aim is therefore to reduce energy waste, increase savings and improve energy efficiency.
The IRPEF deduction for these works was confirmed by the Stability Law until 31 December 2017 at a rate of 65%, maintaining the existing expenditure limits.
2017 Ecobonus expenditure limits
Regardless of the cadastral category of the existing properties, the expenditure ceilings are:
Energy-efficiency improvement of existing buildings: €100,000;
Building envelope works, such as walls, windows and frames: €60,000;
Installation of solar panels: €60,000;
Replacement of winter heating systems: €30,000.
Who is entitled to the 65% tax deduction in 2017?
The 65% Ecobonus deduction for 2017 is available to all private taxpayers, both resident and non-resident, as well as taxpayers engaged in business activities and therefore holding a VAT number, who own or possess, under any title, the property subject to the energy-efficiency works.
The following persons are eligible for the Ecobonus:
natural persons holding a property right over the building;
condominium owners, with regard to works on common condominium areas;
tenants or persons occupying a property under a loan-for-use agreement;
VAT-registered individuals carrying out professional or artistic activities;
taxpayers receiving business income, including natural persons, partnerships and companies, for whom the Ecobonus is deducted from IRES;
professional associations;
public and private entities not carrying out commercial activities.
It should also be noted that the IRPEF Ecobonus deduction for energy-efficiency expenses may also be claimed by cohabiting family members of the person who owns or possesses the property benefiting from the works.
Therefore, spouses, children, relatives up to the third degree and relatives by marriage up to the second degree may incur the costs of carrying out the works and benefit from the tax incentive.
However, for Ecobonus works carried out on buildings used as instrumental assets for business, artistic or professional activities, the expense is not recognised where it is incurred by family members, even if they live with the owner.
See also: how the 2017 air-conditioning bonus works.
Eligible energy-saving works and expenses
The energy-saving works and expenses eligible for the tax incentive, consisting of a 65% deduction from gross IRPEF or IRES income tax, are those incurred by the taxpayer from 6 June 2013 to 31 December 2017, as provided for under the new 2017 Stability Law.
Starting from 1 July 2017, the ordinary deduction will apply.
Which energy-saving works qualify for the Ecobonus?
1) Energy-efficiency improvement works
These qualify provided that they result in a reduction in annual energy demand compared with the values indicated in Annex A to Ministerial Decree of 11 March 2008 for works started in 2008 and subsequent years.
For this type of work, the 65% deduction applies up to €100,000.
2) Works on existing buildings concerning roofs, floors, windows and frames
These qualify provided that they result in a reduction to, or compliance with, the values indicated in Annex B, point 2, of Ministerial Decree of 11 March 2008 and Ministerial Decree of 26 January 2010.
The Ecobonus applies up to a maximum expenditure ceiling of €60,000.
3) Installation of solar panels
This includes solar panels for the production of hot water for both domestic and industrial use, as well as the purchase of thermodynamic systems for the production of hot water and electricity. In the latter case, however, the deduction applies only to the component relating to hot-water production.
The maximum expenditure ceiling is €60,000.
4) Replacement of winter heating systems
This includes replacement with systems equipped with boilers, the purchase of high-efficiency heat pumps and low-energy-consumption systems, and replacement of old water heaters with heat-pump water heaters.
The 65% deduction applies up to a maximum expenditure of €30,000.
The 2016 Ecobonus also includes expenses incurred in carrying out energy-saving works, such as:
installation costs for solar panels;
masonry works;
any diversion and connection works;
dismantling costs;
professional fees for preparing the energy certification required in order for the taxpayer to benefit from the applicable deduction.
Calculation, limits and how to divide the deduction between Form 730 and the Unico tax return
As stated above, the 2017 Ecobonus is a tax incentive providing a 65% deduction on expenses incurred by taxpayers for energy-efficiency improvement works.
The deduction is applied against gross IRPEF for private taxpayers and against IRES for companies.
How does the deduction work?
The deduction for the works carried out must be divided into equal instalments to be deducted through the annual income tax return, using either Form 730 or the Unico tax return.
The number of instalments is a maximum of 10, and therefore the deduction is divided across 10 income tax returns.
The instalments must be calculated on the basis of the expenditure incurred, while always respecting the expenditure limits applicable to each type of work.
However, attention must be paid to whether the amount of the deduction for energy-efficiency expenses exceeds the amount of IRPEF or IRES payable by the taxpayer. If the Ecobonus deduction exceeds the tax due, the excess amount cannot be carried forward to the following year and cannot be claimed as a refund.
Which documents are required?
Once the energy-efficiency works have been completed, in order to benefit from the tax incentive and formally claim the IRPEF or IRES deduction, the taxpayer must submit specific documentation, namely:
1) Energy Performance Certification of the building
This is not required where the energy-efficiency improvement consists of:
replacement of windows and frames in an individual residential unit;
installation of solar panels;
installation or replacement of boilers;
heat pumps;
geothermal systems.
2) Information sheet describing the works carried out
In this case, the taxpayer may use the simplified form, which can be completed accordingly.
3) Certification confirming that the works comply with the requirements established by law
This certification is required only in the case of:
installation of windows and frames;
replacement of winter heating systems.
Where the heating system has a capacity below 100 kW, the certification may be replaced by the manufacturer’s declaration.
For replacement of a water heater, certification by a qualified technician is required.
The Energy Performance Certification and the information sheet must both be submitted to ENEA within 90 days from completion of the works, exclusively electronically.
2017 Ecobonus documentation: accepted payment methods for obtaining the deduction
For the tax incentive to be recognised, payments relating to energy-efficiency works that are to be deducted must be made as follows:
Private individuals: by bank or postal transfer;
Businesses: there is no obligation to use a specific payment method.
Which documents relating to the 65% deduction must be retained for inspections by the Italian Revenue Agency?
The following documents must be retained:
certification issued by a qualified professional;
evidence that the documentation was transmitted to ENEA, together with a copy of the documentation submitted;
invoices and tax receipts relating to Ecobonus expenses;
receipts for bank transfers made, except in the case of businesses;
for works on common parts of condominium buildings: a copy of the condominium meeting resolution and the table showing the allocation of expenses according to ownership shares;
for works carried out by a tenant or usufructuary: a declaration of consent to the works issued by the property owner;
documentation proving the existence of the building benefiting from the Ecobonus deduction, such as registration in the cadastral records or an application for cadastral registration, or a copy of the F24 form relating to any IMU property tax due.