# Telework and taxes



## Kruser (Feb 4, 2016)

We are considering relocating to Italy and continuing to work remotely for American firm. Does anyone understand the tax implications of this? If my 401k contributions and such are suddenly considered taxable income, it could be a nightmare. Does one figure Italian taxes from US net income, or do you have to figure everything according to Italian rules/deductions?
Thanks in advance!


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## Bevdeforges (Nov 16, 2007)

If you're resident in Italy and working in Italy (i.e. you are physically located in Italy while doing the work you are paid for), then you are subject not only to Italian taxes, but also to Italian labor law.

However, as US citizens, you are also obligated to file US taxes if your worldwide income exceeds the regular filing threshold for your filing status. You won't be double taxed, but it's up to you how you manage that - usually either the Foreign Earned Income Exclusion (FEIE) for your salary/"earned income" or the Foreign Tax Credit (FTC) where you claim the Italian income taxes you pay as a credit against any US income tax tab you run up.

Take a look at IRS publication 54 for the US side of things. I leave it to someone resident in Italy to fill you in on the Italian side of taxes. However, basically you should wind up paying Italian income taxes on your salary income while resident in Italy plus any Italian source investment or other income.
Cheers,
Bev


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## Kruser (Feb 4, 2016)

Thanks Bev


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## BBCWatcher (Dec 28, 2012)

The U.S.-Italy social security treaty appears to indicate that you stay on U.S. Social Security and don't make contributions to the Italian system in the circumstances you describe. Your income tax will likely flip to Italian rates (which are generally higher), but as Bev mentioned you'll have tax and financial reporting obligations in both countries. Italy has a pair of wealth taxes so you'll probably owe some of that. You and your employer should be able to continue making 401(k) contributions per the U.S.-Italy tax treaty and without negative Italian tax consequences, but you'll have to check the treaty to be sure.

If this is your employer's idea then I'd ask for "tax equalization," or, failing that, tax preparation assistance at least for the first couple years.


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