Private housing is one of the most common assets for Spanish residents, whether individuals or families. And it is also one of the assets that must be included in the annual personal income tax (IRPF, in its Spanish acronym) return, whose term in 2022 (for the 2021 fiscal year) begins today 6 April and ends on 30 June.
As a general rule, all taxpayers, regardless of whether they own the property where they usually reside or rent a house to third parties, must include the real estate in their personal income tax return.
Only the owners of unbuilt lots and bare owners are exempt from this obligation. Bare owners are those that cannot enjoy the use of a property because the usufructuary lives in it. However, as a general rule, housing must be included in the income statement for information purposes, even if it is the taxpayer's residence and does not generate income.
Until 2013, Spanish residents were able to enjoy IRPF deductions for the purchase of a home. However, these deductions were eliminated in the framework of the adjustment plans to deal with the economic crisis. Therefore, those who bought their house after that date are not entitled to this tax advantage, but those who bought it before 2013 are.
The limit of the tax base on which the deduction is calculated is 15% of the amount that has been paid during the year for the home, either in monthly mortgage payments or through extraordinary amortizations, on a maximum amount of 9,040 euros.
In other words, in the best case scenario, the taxpayer will be able to deduct 1,356 euros.
The Spanish Tax Agency (Agencia Tributaria) also allows deductions for the amounts invested in rehabilitation works and adaptation of the taxpayer's habitual residence due to physical disability. In this case, the limit is 12,080 euros per year.
Taxpayers must take into account that they can only include in the income tax return the proportional part of the home that corresponds to each owner. That is, 50% if they share it with their partner or spouse.
The income generated from the rental of a property must also be included in the income tax return.
However, the Spanish tax authority says that all the expenses that are necessary for the rental can be deducted, such as the Property Tax, community expenses, home insurance or the payment of the municipal fee for the garbage collection service.
As in the case of owned homes, each taxpayer must declare just for the part of the property that they own.
That is, a taxpayer who owns 50% of a house that generated 10,000 euros in rental income must include 5,000 euros in the income tax return. And the same rule applies to expenses: if the community expenses amount to 1000 euros, they can deduct 500 euros in the personal income tax declaration.
In any case, the limit of the deductions for renting a house that the Spanish Tax authority allows is the income obtained from the rental.
And what about the tenants?
The Spanish tax system is so complicated due to the country's administrative decentralization that it is very difficult to detail all the cases of deductions contemplated by each regional government.
As a general rule, throughout Spain, tenants can benefit from deductions of up to 10.5% on rental contracts prior to 2015 as long as the base does not exceed 9,040 euros.
Beyond this bonus, we recommend that each tenant inform themselves on the tax agency's website about the deductions that apply in their territory of residence.
Selling a house - the exemption
The sale of a home is taxed as a capital gain based on the difference between the sale price and the purchase price. The tax rate ranges between 19% and 23% until 2020, and up to 26% from 2021.
In this case, the taxpayer can include in the declaration all the expenses paid for the sale of the property, such as the property registry, the notary or the eventual commissions of the real estate agency.
The sale, however, is exempt if the previous owner is over 65 years old or if with the money obtained from the transaction they buy another habitual residence within two years.
Energy efficient renovations
From this year, owners can benefit from deductions for having carried out renovation works designed to improve the energy efficiency of the property. But beware: as they are aids linked to the European funds of the Recovery, Transformation and Resilience Plan, although they come into force in this personal income tax campaign, only renovations that began after 6 October 2021 can benefit from these deductions.
For works in the main residence that reduce the demand for heating and cooling by 7% (for example, a modernization of windows) taxpayers can have a deduction of 20%, with a maximum of 5,000 euros per home.
Renovations that reduce the consumption of non-renewable energy by 30% or improve the energy rating of the home to A or B may benefit from a 40% deduction, with a maximum of 7,500 euros.