VAT on purchasing home abroad (Italy)

This is a large transaction and the very best advice I can give you is to pay an expert for an expert opinion. Such as a tax lawyer with experience in tax implications of international property purchase.

My gut instinct is that VAT is not going to be a tax credit in the way that any income tax paid in Italy would be. Assuming you are buying the house to occupy as your primary residence, look into the tax code on irs.gov website regarding other deductions related to home buying and ownership, e.g. mortgage interest tax deductions, etc., and try to determine whether the codes say anything about where the house is located. If the only requirements are that you are a U.S. citizen and that you live in the house, well you may meet those requirements.

Again, due to the likely large amount of money involved, please do get professional help with this issue. Spending a couple thousand now to set things up right will be worth it in the long run. You might be able to get away with stealing from the mob, but the IRS always gets their money.