Estate tax guide
US Estate Tax vs Italian Inheritance Tax
US federal estate tax applies to worldwide assets above the federal exemption. Italian inheritance tax to direct heirs runs at about 4% above a high per-heir threshold (EUR 1M per child). Once you establish Italian residency and domicile, Italian rules can apply to assets in Italy, while your US estate may still be subject to federal and state estate tax. The interaction of Italian residency, domicile, and US estate planning is fact-specific. The arithmetic for a $1.5M estate, worked out.
The most important fact
The vast majority of US estates owe zero federal estate tax. The 2026 federal exemption is $15,000,000 per individual (up from $13,990,000 in 2025), made permanent by the One Big Beautiful Bill Act (OBBBA, 2025) and indexed for inflation from 2027. A married couple can effectively shelter up to $30,000,000 through portability (the surviving spouse uses the deceased spouse's unused exclusion via Form 706). The top rate above the exemption is 40%. [1][2]
Note: portability requires a timely federal estate tax return (Form 706) to elect DSUE (Deceased Spouse's Unused Exclusion), even when no tax is owed. Missing this deadline forfeits the unused exclusion.
Federal estate tax vs Italian inheritance tax
Side-by-side overview of the two systems a US retiree in Italy may face.
US federal estate tax
Sources [1][2]
Applies to worldwide assets of a US citizen or domiciliary, regardless of where they reside. Moving to Italy does not end US estate tax exposure for a US citizen.
Italian inheritance tax (imposta di successione)
Source [4] - Agenzia delle Entrate
| Heir category | Rate | Allowance per heir |
|---|---|---|
| Spouse and direct line (children, parents, ascendants / descendants) | 4% | EUR 1,000,000 per heir |
| Siblings | 6% | EUR 100,000 per heir |
| Other relatives (to 4th degree) and in-laws (collaterals to 3rd degree) | 6% | None |
| Unrelated persons | 8% | None |
| Heir with a severe disability (L. 104/1992 art. 3 c. 3) | Rate of their relationship category | EUR 1,500,000 (regardless of relationship category) |
Applies to worldwide assets when the deceased was resident in Italy. If the deceased was not Italian-resident, only Italian-situs assets (e.g. an Italian property) are taxed.
Note: inherited real estate also attracts ancillary taxes (imposta ipotecaria and imposta catastale) on top of the above rates. Confirm current rates with a notaio or commercialista.
Illustrative example (not advice)
A $1.5M estate passing to two children
This is a simplified, illustrative scenario only. Individual circumstances vary significantly. Do not rely on these figures for planning.
US federal estate tax
Estate of $1,500,000 with a 2026 individual exemption of $15,000,000.
$0
The estate falls entirely within the federal exemption. No federal estate tax owed. State tax may still apply depending on the decedent's state of domicile (see below).
Italian inheritance tax (2 children)
Estate of EUR 1,500,000 split equally: EUR 750,000 per child. Each child's allowance is EUR 1,000,000. Both shares fall within the allowance.
EUR 0
With two children, the combined allowance (EUR 2,000,000) exceeds the estate. No imposta di successione owed to either child. Ancillary property taxes may still apply to any real estate in the estate.
At this estate size, neither system generates tax on the main inheritance -- but state estate or inheritance tax in Oregon ($1M threshold), Rhode Island, Massachusetts, or other low-threshold states could still apply at the US side. See the state section below.
State estate and inheritance taxes
Separate from federal, approximately 12 states plus Washington DC levy an estate tax, and 6 states levy an inheritance tax (Maryland has both). These operate at much lower thresholds than the federal exemption and can hit estates that owe zero federal tax. [3]
| State | Tax type | Threshold / trigger | Top rate |
|---|---|---|---|
| Oregon | Estate tax | $1,000,000 | 16% |
| Rhode Island | Estate tax | ~$1,802,431 | 16% |
| Massachusetts | Estate tax | $2,000,000 | 16% |
| New York | Estate tax | ~$7,160,000 | 16% |
| Pennsylvania | Inheritance tax | No threshold (rate by relationship) | Up to 15% |
| New Jersey | Inheritance tax | No threshold (rate by relationship) | Up to 16% |
| Maryland | Both (estate + inheritance) | $5,000,000 (estate) | Up to 16% |
Source: Tax Foundation, 2025 data [3]. State legislatures adjust thresholds and rates; Iowa's inheritance tax is currently phasing out. Figures above are illustrative examples, not a complete list of all states with these taxes. Verify the rules for your specific state with a US estate attorney.
Residency, domicile, and double exposure
Which system taxes which assets depends on where the decedent was domiciled at death.
US federal estate tax scope
Reaches the worldwide estate of a US citizen or US-domiciled person. A US citizen who retires to Italy remains subject to US estate tax on worldwide assets -- US citizenship-based taxation does not end when you move abroad. [1]
Italian inheritance tax scope
Reaches worldwide assets if the deceased was resident in Italy at death. If the deceased was not Italian-resident, only Italian-situs assets (such as an Italian property) are taxed by Italy. [4]
Double exposure: the key risk for US-citizen retirees in Italy
A US citizen who is resident in Italy at death can fall under both systems on worldwide assets simultaneously. Given the high federal exemption ($15M), the overlap creates a material issue mainly for larger estates, but the interaction is fact-specific and must be analyzed individually.
Treaty status (LOW-MEDIUM confidence -- verify with a cross-border attorney)
To the best of this research's knowledge, there is currently no US-Italy estate or inheritance tax treaty in force. Unlike the US-Italy income tax treaty (1999), no equivalent treaty appears to exist for estate and inheritance taxes. Double-tax relief, if any, would need to come through foreign-tax-credit mechanisms under each country's domestic rules rather than a treaty framework. This point is low-to-medium confidence and MUST be confirmed by a qualified cross-border estate attorney before you rely on it for planning.
Sources
Informational only. Not tax or legal advice. US federal estate tax exemptions, state thresholds, and Italian inheritance tax rules change frequently. The federal exemption figures ($13,990,000 for 2025; $15,000,000 for 2026) and the permanent status of the OBBBA are sourced from IRS publications; the state-level figures are from Tax Foundation 2025 data and may have changed. Italian inheritance tax rates and allowances are from Agenzia delle Entrate. The no-treaty claim between the US and Italy for estate/inheritance purposes is low-to-medium confidence only -- confirm with a cross-border estate attorney. State estate and inheritance tax thresholds vary and change; verify for the specific state. Ancillary Italian taxes (imposta ipotecaria and catastale) on inherited real estate are not included in the rate table. Do not use these figures for estate planning without first consulting a qualified US estate attorney, an Italian notaio or commercialista, and if your estate is large, a cross-border estate planning specialist.
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This tool is informational only. It does not constitute tax or legal advice. Confirm your specific position with a qualified Italian commercialista AND a US cross-border tax advisor (a US CPA or enrolled agent familiar with the US-Italy treaty) before making any decision.