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The presence of extensive housing subsidies characterises the current tax system as inefficient. In this paper, we study whether inefficiency is the price to be paid to improve equity, by assessing the actual distributive impact of housing taxation on Italian households. We concentrate on the personal income tax on the main residence, and compare provisions of the Tax Code with an alternative approach, by considering the imputed rent from owner-occupied dwelling as a component of the personal income tax gross income. Our results suggests that current tax system is just as inefficient as it is inequitable. In particular, by including imputed rent from owner-occupied dwellings as a component of the personal income tax base, we find that overall inequality is reducing. Moreover, broadening the personal income tax base could lead to a consisten