Observatory › Tax and returns › Sale of building land by private individuals: the capital gain and deductible costs

Sale of building land by private individuals: the capital gain and deductible costs

A capital gain realised by a private individual on the sale of building land is always taxable, however long the land has been held. The practical difficulty lies in correctly determining the base cost and the allowable costs.

A capital gain realised on the sale for consideration of land capable of being built on is always taxable as miscellaneous income (redditi diversi), irrespective of how long the land has been held. The planning classification of the land at the time of sale is decisive: for income tax purposes, an area qualifies as building land if it can be built on under the general town plan adopted by the municipality, regardless of whether the plan has been approved by the region or implementing plans have been adopted.

How it is calculated

The gain is the difference between the consideration received and the purchase price plus any other related costs (acquisition charges, notary fees, any infrastructure charges and other directly connected expenses), adjusted for the change in the ISTAT consumer price index for households of blue- and white-collar workers. For land received by inheritance, the base cost is the value stated in the inheritance tax return, or the value subsequently determined and assessed, plus the inheritance tax and any subsequent related costs. For land received as a gift and sold on or after 31 December 2024, the base cost is the cost borne by the donor, plus the gift tax and any subsequent related costs. The gain is subject to separate taxation (tassazione separata), unless the taxpayer opts for ordinary taxation in the income tax return. However, the seller cannot ask the notary to apply the 26% imposta sostitutiva (substitute tax) available for sales of property acquired or built no more than five years earlier: building land has been excluded from it since 1 January 2007.

Revaluation and the substitute tax

Since 2025 the revaluation (rideterminazione) of the value of land has been available on a permanent basis. For land held on 1 January of each year, by 30 November of the same year a valuation report must be drawn up and sworn and the 18% imposta sostitutiva must be paid on the entire appraised value; payment may be spread over three equal annual instalments, with interest at 3% a year on the instalments after the first. For land held on 1 January 2026 the deadline is 30 November 2026. The appraised value is used in place of the acquisition cost or value; the cost of the valuation, if borne by the taxpayer, is added to the acquisition value. It is a choice to weigh up early, comparing the cost of the revaluation against the expected saving.

• Point (b) of Art. 67(1) TUIR: capital gains on building land.
• Art. 68(2) TUIR, as amended by Art. 7(1) of Legislative Decree 192 of 13 December 2024: calculation of the gain and related costs.
• Art. 7 of Law 448/2001, as amended by Art. 1(30) of Law 207/2024 (permanent revaluation of the value of land, imposta sostitutiva of 18%). Point (g-bis) of Art. 17(1) and Art. 17(3) TUIR. Art. 1(496) of Law 266/2005 and Art. 1(310) of Law 296/2006. Art. 36(2) of Decree-Law 223/2006, converted into law by Law 248/2006. From 1 January 2027 the rules are carried over into Articles 76, 77, 244 and 245 of the new Consolidated Income Tax Act approved by Legislative Decree 117 of 19 June 2026.