Capital Losses in Italy Cut Your Tax, but They Expire

Why does 31 December 2026 matter if you lost money in 2022?

2022 was a rare year: shares and bonds fell together. COVIP, the Italian pension fund supervisor, noted it in its report on that year: equity prices suffered heavy falls, and so did bond prices as interest rates rose. The equity lines of contractual pension funds lost 11.7% on average, the mixed bond lines 10.3% (COVIP, press release of 7 June 2023).

Anyone who sold shares, funds, ETFs or bonds at a loss that year realised a capital loss (minusvalenza). The law lets you use it in the year it arises and in the four that follow, "no later than the fourth" (article 68, paragraph 5, of the Consolidated Income Tax Act (TUIR)). For a 2022 loss the fourth year is 2026: whatever has not been used by 31 December is lost.

The same applies to moving from one fund to another: even a switch between sub-funds of the same fund is a redemption, and if it closes at a loss it creates a capital loss (article 67, paragraph 1-quater, of the TUIR).

Myth 1: "A stock market loss is good for nothing"

It is good for something, and it can be measured in euros. The tax authorities set the loss aside and deduct it from gains of the same kind that you realise later: on that part of the gain you do not pay the 26% tax (Law 207/2024, article 1, paragraph 23). In the language of banks and savers, the losses still available are called the "zainetto fiscale", literally the tax backpack: in this article, the tax-loss balance.

A €1,000 loss is therefore worth up to €260 in tax; a €10,000 loss up to €2,600. "Up to", because the saving comes only if, within the four years, you realise gains that can absorb it.

Which gains can use the tax-loss balance, and which cannot?

Capital losses are miscellaneous income (redditi diversi) and can be offset only against other miscellaneous income. Here is how the most common instruments in a securities account behave.

Sources: article 67 of the TUIR for miscellaneous income, article 44, paragraph 1, letter g) and article 26-quinquies of Presidential Decree 600/1973 for fund income; the instructions for the 730/2026 tax return ("Plusvalenze" appendix) confirm that a loss on a fund is a capital loss that can be offset.

Myth 2: "With ETFs I can recover everything"

This is the asymmetry that surprises people most. If you sell an ETF or a fund at a loss, the loss goes into the tax-loss balance. If you sell it at a gain, you pay 26% on the gain and the balance stays untouched, because that gain is capital income.

Anyone who invests only in funds and ETFs can therefore build up losses they are never able to use. Recovering them takes gains on other instruments: shares, bonds, ETCs, certificates. Watch the name: a gold ETC is not an ETF, and its gain is miscellaneous income. If you want a refresher on the difference between the three instruments, we explain it in ETFs, stocks and bonds: what changes for those who hold them.

How do government bonds count?

Gains on Italian government bonds and on those of white-list countries are taxed at 12.5% instead of 26%. To achieve this, the law counts them at 48.08% of their amount, which is 12.5 divided by 26 (Legislative Decree 461/1997, article 5, paragraph 2, as worded by Decree-Law 66/2014, article 3). This applies to gains and to losses:

• a €10,000 loss on a BTP goes into the balance as €4,808, and is therefore worth up to €1,250 in tax;
• a €10,000 gain on a BTP uses €4,808 of the balance and saves you €1,250.

A loss on a fund also counts at 48.08% for the part attributable to the government bonds it holds.

What is a €10,000 loss from 2022 worth if you use it by 31 December?

It depends on what you sell at a gain by year end. Take a €10,000 capital loss realised in 2022 by selling an equity fund, still unused.

How we did the sums: a 26% rate; for government bonds the gain counts at 48.08%, so it takes 10,000 ÷ 0.4808 = €20,799 of gain to absorb the whole loss, and 20,799 × 12.5% = €2,600. We do not include transaction costs. The saving is the same in the first two rows because the 48.08% mechanism is designed precisely to give this result.

Myth 3: "The tax authorities keep my losses until I use them"

No. The four-year rule is the same for all miscellaneous income of a financial nature, and each loss has its own expiry date, counted from the year it arose.

Within the same year, gains and losses are first netted against each other; only what is left over uses the balance, or adds to it.

From 1 January 2027 the rules change address but not substance: the new consolidated income tax code (Legislative Decree 117/2026, which applies from 2027) restates the four-year rule in article 77 and the bank-account rule in article 306, in the same words.

What difference does the administered regime make?

If you hold your securities with an Italian bank, you are usually in the administered regime (regime amministrato): the bank acts as withholding agent, calculates gains and losses transaction by transaction and offsets them itself. But only within the same account (Legislative Decree 461/1997, article 6, paragraph 5).

In the self-declared regime (regime dichiarativo), typical of anyone using a foreign broker, you calculate and declare everything yourself. A loss can be carried forward only if you reported it in the tax return for the year it arose. In the 730 return (the standard return for employees and pensioners) you use section T: line T13 carries the losses left over from the previous return, line T14 those certified by the bank, line T102 those not used, split by year (730/2026 instructions, section T). Holders of a VAT number use the Redditi return, section RT.

In the managed regime (regime gestito), the one for discretionary portfolio management, tax is charged on the overall result of the mandate, and a negative result can be recovered over the following four years, again within the mandate (Legislative Decree 461/1997, article 7, paragraph 10).

Myth 4: "If I change bank I lose my capital losses"

Not necessarily. If you close the account, the remaining losses can be used in another administered account held in the same names, or in your tax return, with the certificate the bank must issue you. The expiry date stays the original one (article 6, paragraph 5, of Legislative Decree 461/1997).

The real risk lies elsewhere: having two banks. Losses in account A do not offset gains in account B, which bank B has already taxed. And the "same names" rule must be taken literally: losses in an account held jointly with your spouse do not move to an account in your name alone.

Is it worth selling and buying back before the expiry date?

It is a common practice: if you hold a security showing a gain, you sell it before year end to use the expiring loss and buy it back straight away. The realised gain is offset by the loss, and the repurchased security has a new, higher book cost, so you will pay less tax in future.

An example. You have €5,000 of unused 2022 losses and shares worth €25,000 that cost you €20,000: an unrealised gain of 20%, or €5,000.

• Sell and buy back: at a cost of 0.2% per trade you spend 2 × 25,000 × 0.2% = €100.
• The €5,000 gain uses up the whole loss: you pay nothing today.
• The new book cost is €25,000 instead of €20,000: when you sell at a gain, you will pay 5,000 × 26% = €1,300 less.
• The net advantage is €1,200, deferred until the future sale.

The ETF trap. If you sell an ETF to do the same thing, the €5,000 gain is capital income: you pay €1,300 in tax at once, the loss stays in the balance and expires on 31 December anyway. You have brought a tax forward instead of saving it.

Before you do it, check three things: the real costs, including the spread between the buying and selling price; the risk that the price moves between the sale and the repurchase; and timing, because an order executed in the last week of the year may not settle by 31 December. Ask your bank for the last useful day. And do not sell an investment you would not buy again just for a tax advantage: portfolio choices are made on goals, as we explain in How to read a portfolio without letting fear take over.

Cryptocurrencies: a separate balance

They are a separate compartment. Losses on crypto-assets offset only gains on crypto-assets, over the same four years, and only if you reported them in the tax return for the year they arose (article 68, paragraph 9-bis, of the TUIR). Since 2025 there has been no €2,000 exemption, and from 2026 the tax rose from 26% to 33%, except for euro e-money tokens, which stay at 26% (Law 207/2024, article 1, paragraphs 24 and 25).

A consequence few people notice: a declared 2025 crypto loss used against a 2026 crypto gain saves 33%, not 26%. On the risks of the instrument itself we wrote Cryptocurrencies: everyone talks about them, but who really understands them?.

What should you check before 31 December?

1. Your bank's tax statement: how many capital losses you have, from which year and in which account. If you file on your own, line T102 of your latest 730 or section RT of the Redditi return.
2. Your 2022 losses: they are the only ones that expire this year.
3. What you hold at a gain that can absorb them: shares, bonds, government bonds, ETCs, certificates. Not funds or ETFs.
4. How many accounts you have and whose names they are in: the balance does not move from one bank to another by itself.
5. The costs and timing of any sell-and-buy-back, with the last useful day given by your bank.
6. Crypto-assets: the losses count only if reported in the year they arose.

To see in euros what expires and how much you recover with the sales you have planned, you can use our capital loss recovery simulator. You will find the other year-end deadlines in our list of year-end financial deadlines.

Glossary

• Capital loss (minusvalenza): the loss you realise when you sell, or are repaid, an investment for less than you paid for it.
• Capital gain (plusvalenza): the gain in the opposite situation.
• Tax-loss balance (zainetto fiscale): the common name for the capital losses still available, split by year of origin.
• Miscellaneous income of a financial nature (redditi diversi): gains and losses on shares, bonds, government bonds, ETCs, ETNs, certificates and derivatives, and losses on funds and ETFs. They offset one another.
• Capital income (redditi di capitale): dividends, coupons, interest and gains on funds, SICAVs and ETFs. They cannot be offset against capital losses.
• Administered regime (regime amministrato): the bank calculates and pays the tax on each transaction and offsets losses within the same account.
• Self-declared regime (regime dichiarativo): the taxpayer reports gains and losses in their tax return.
• Managed regime (regime gestito): in a discretionary portfolio mandate, tax is charged on the overall result for the year.
• White list: the list of countries that exchange information with the Italian tax authorities; their government bonds enjoy the same 12.5% rate as BTPs.

Sources

• Consolidated Income Tax Act (Presidential Decree 917 of 22 December 1986), articles 44, paragraph 1, letter g); 67, paragraph 1, letters c-bis)-c-sexies) and paragraph 1-quater; 68, paragraphs 5 and 9-bis (text in force until 31 December 2026) (in Italian).
• Legislative Decree 461 of 21 November 1997, articles 5, paragraph 2 (48.08%), 6, paragraph 5 (administered regime) and 7, paragraph 10 (managed regime) (in Italian).
• Decree-Law 66 of 24 April 2014, article 3 (the 26% rate and the 48.08% share) (in Italian).
• Presidential Decree 600 of 29 September 1973, article 26-quinquies (fund income) (in Italian).
• Law 207 of 30 December 2024, article 1, paragraphs 23-25 (the 26% rate; crypto-assets at 33% from 2026; end of the €2,000 exemption) (in Italian).
• Legislative Decree 117 of 19 June 2026, consolidated code of income tax legislation, articles 77, 304, 306, 307 and 377 (applies from 1 January 2027) (in Italian).
• Italian Revenue Agency (Agenzia delle Entrate), instructions for the 730/2026 tax return, section T and the appendix "Plusvalenze: criteri di determinazione della base imponibile"; circular 33/E of 15 July 2011, referred to there (in Italian).
• COVIP, press release of 7 June 2023 on the Annual Report for 2022 (in Italian).