Considering getting Italian Citizenship, but have questions

Based on our daughter-in-law’s new German citizenship and then passport, I think I know know the answers to 2 of your 3 questions. The website for the Italian Consulate will give you the best information for #1.

1. No, your spouse would not have automatic residency.
2. No, you would not need a visa to stay longer than 90 days.
3. I don’t know about car purchases for your situation.

Apologies if this isn't helpful but while you're waiting for direct answers to your question, this very recent thread from someone in sort of a similar situation (citizenship stuff; buying a property; requirements for spousal citizenship, etc) contains some info that might be useful, especially if you're just beginning to look at purchasing and maintaining a 2nd home.

https://community.ricksteves.com/travel-forum/italy/where-to-buy-a-tiny-slice-of-paradise-in-italy

Very helpful, thank you.

if you want to remove the super huge print from your question it is easy.

Just edit the topic and remove the number hash (#) symbol before the number 2 and number 3 and save; it will then look normal.

Only of you want to of course.

1. Once you become an Italian citizen (by whichever means), your wife can apply for Italian citizenship also without the need to reside in Italy. The requirement is that she is married to you for at least 3 years. I am not sure if it is 3 years from the time you married (while you were not yet citizen) or 3 years of marriage with an Italian citizen (in which case you need to wait 3 years from the time you become citizen). Since 2020 they require a test of Italian language I think. If, once you become a citizen, you decide to move to Italy your wife can come with you immediately and apply for a permesso di soggiorno. Inquire with your local Italian consulate.
2. No. You can stay longer throughout the Schengen Zone.
3. Yes. I posted this answer in the other post of yours.

Be aware that if you stay in Italy longer than 183 days in a calendar year, even as a non resident, you become subject to Italian taxes.

Thank you.

If I am correct, I can use the US FTC to offset the Italian income taxes I pay against my US taxes, as that is where my income assets are. And Abruzzo is one of the regions that caps the first 10 years of taxes @7%.
And it appears that I would not have the language requirement as I would become a citizen by birthright. I do speak a moderate level of Italian but do not have the Italian School designations required. My wife, should she apply for citizenship, would have to complete the certified school langauge courses in Italy to obtain it. However, I believe that she could simply apply for residency without applying for citizenship, the same as I can if I decide not to pursue my citizenship (we meet income requirements, etc.) and therefore avoid the language certificate req. (she already speaks some Italian).
If I am not correct on the above, please advise what the proper scenario(s) should be.
Darwin

As I understand it, the language requirement for your wife would be to demonstrate a certain language level in a personal interview, not just that a particular language course has been taken. Actually getting Italian citizenship is not an easy matter even by birthright. There are documentation steps and the difficulty can vary with where you live in the US (i.e. which Italian consulate you must use) and your personal circumstances. I would allow a couple of years to attain it.

I read about the requirements recently through an interesting blog from a woman whose family lived in Spello for a year. She is Michelle Damiani. The topic is titled “Corn Nuts at the Cultural Center”. Here’s a couple of the sentences.

“ After six months of grueling study for the B1 Italian language exam required for citizenship by marriage, the exam is finally behind me. If the test is ahead of you, do make sure you read to the end, as I want to save you from the same grave mistake I made (you’re welcome). ”

“ To apply for Italian citizenship via marriage and get my own maroon passport emblazoned with the EU crest like the rest of the family, I have to submit a certificate saying that I passed the B1 Italian-language exam, indicating intermediate language competency.”

There are several active Facebook groups for Americans seeking Italian citizenship, so you might find people there with more experience and knowledge than on this forum.

https://conssanfrancisco.esteri.it/consolato_sanfrancisco/en/i_servizi/per_i_cittadini/cittadinanza/citizenship-by-descent.html

Regarding taxes the US has a tax treaty with Italy to avoid double taxation. If you become a resident of Italy you will pay taxes to Italy and not to the US. If you are a citizen of Italy, all your taxes are paid to Italy, if you are not a citizen of Italy, just a resident, then you pay taxes to Italy for everything except public pensions (social security), which will continued to be paid to the US. The US still requires you file a return, even though you may not be double taxed. The matter is complicates so if you decide to go it is best you hire a tax professional familiar with tax of both places.
Here is one in Florence:
https://www.techlegal-partners.com/en/federico-migliorini/

I thought the US continued to tax you unless you renounced your citizenship as well as moving overseas? You do get to take the foreign tax credit for taxes paid to another country, so it seems that your total tax obligation would be the same (or approximately the same) as if you were an ordinary US citizen paying no taxes elsewhere, as long as what you owed Italy didn't exceed what Uncle Sam wanted before the foreign tax credit was figured in.

It's definitely possible I have this wrong, since my only personal experience with the topic is related to paltry amounts of foreign tax paid by one of my mutual funds.

Former expat. Paid taxes to countries of residency, filed US 1040 along with foreign earned income exclusion and related tax forms. There is a maximum exclusion limit. I believe current is $120,000 per person, it changes annually. You also need good records of length of time out of the US to be eligible for the exclusion. This can impact first and final year abroad most easily, but also any year in which you return to the US for a period of time. You also may need to file Foreign Bank and Financial Accounts (FBAR).

Pension rules for foreign holdings should also be checked. For instance, if residency in foreign country is short term, can you get the money on leaving country or only at retirement age. I didn't hold citizenship or even permanent residency which might have added concerns. Also, may need to consider years of not paying into US Social Security depending on personal circumstance.

Best to see a tax professional for personal advice on individual circumstances.

Certainly not a tax professional, but my rough understanding of the tax treaties, like with Italy, is that it prevents double taxation, but if the US tax owed is more than the resident foreign country, then you still are on the hook for the difference in tax amount to the US. ie: If you owe $10K in US taxes, Italy gets you for $7K, tax owed to US is $3k. (The other situation, Italian Passport holder residing in US, I don't know). Short of any special exemptions or credits, is this correct? (or maybe not an issue if Italian taxes run much more than US taxes).

Regarding taxes the US has a tax treaty with Italy to avoid double taxation. If you become a resident of Italy you will pay taxes to Italy and not to the US.

As others above have stated, that is only partially true. You will receive a credit (loosely speaking) for taxes paid to Italy or elsewhere but you are still liable for US taxes unless you renounce your US citizenship. That is the only way you get off the hook. It's sort of the same principle that applies to a resident of one state who works in another state. But you will be paying something to the US, unless your income is so low that you do not owe any taxes.

I have a friend who is a US citizen and a citizen of the Netherlands. She has been there for almost 50 years, married a Dutchman, worked there, had children, retired and gets a pension from there. But she still pays taxes to the US. It pisses her off to no end, even though I have pointed out to her that she could renounce her citizenship to avoid it. But she's not willing to do that. And that is the whole point. The US provides certain benefits to all of its citizens, including those living abroad. But you continue to pay taxes as long as you're a citizen.

And I definitely agree that you should be seeking a tax professional when it comes time to file.

I assumed you would have to pay US taxes on any investment income earned from US-based sources. Is that not true?

"As others above have stated, that is only partially true. You will receive a credit (loosely speaking) for taxes paid to Italy or elsewhere but you are still liable for US taxes unless you renounce your US citizenship. That is the only way you get off the hook. It's sort of the same principle that applies to a resident of one state who works in another state. But you will be paying something to the US, unless your income is so low that you do not owe any taxes."

This is my understanding as well. All of my income would be generated in the US (retired) so I would need to file 2 returns, one in Italy and one in the US. The US should give me a credit on my taxes for what I have to pay on my Italian return. I would not be relinquishing my US citizenship, in fact, I may just apply for residency in Italy. The citizenship process is expensive and requires a lot of time. I am still trying to assess what the benefits would be to us as compared to just establishing residency if that is where we decide to live.

I think you guys should not make assumptions based on hearsay, deeply felt beliefs based on urban legends, or based on what you heard about the experience of “a neighbor’s cousin who had a friend who had a brother in law who moved to Italy”.

The matter is complicated, and although I’m a professional accountant, I prefer to leave it to accountants who are more expert than me, since I don’t know all the complex implications stemming from the tax laws and the treaty regulating the tax matter between the two countries in question.

If you want to read more about it, you can start with this article and even read the entire US-Italy tax treaty below. In any case I’ve decided that these things are best left to professionals who have experience in this matter.

https://home.treasury.gov/system/files/131/Treaty-Italy-8-24-1999.pdf

And Abruzzo is one of the regions that caps the first 10 years of taxes @7%.

There's lots of other good general advice here about the residency process. I just want to clarify the statement you made above. The 7% tax regime (which I am currently enjoying) applies to 9 tax years, not 10. And only if you settle in a town in one of the 7 southern regions with a population under 20,000.

Not hard to do in Abruzzo, where there are only a double handful of towns bigger than that, but I just wanted to be sure you were clear that the tax break is restricted to new residents of small towns.

Side note: I passed the B1 test this year and didn't find it nearly as challenging as the driver's license exam. I didn't see it mentioned here, but you must obtain an Italian driver's license within one year of taking up residency, and that means taking the theory and practical tests in Italian only. Your U.S. license is invalid for driving in Italy after that time, and if you are stopped, they can impound your car and confiscate your U.S. license.

Edit: instead of buying and insuring a car, I recommend you look into a subscription car service such as Drivalia Car Cloud. They offer annual subscription contracts to rent a car, including all maintenance and insurance. You can cancel the subscription anytime with no penalties with one month notice. It's significantly cheaper than the French car leases and can be used for 1-12 months as needed. I'm on my third year of this subscription plan and it's been hassle-free and affordable.