Deductions for housing in income tax returns

Whether you live in Spain or have a home here, you should know what the implications are, and how you can benefit from the deductions for housing in your income tax return.

Taking advantage of the fact that we are in the middle of the Income Tax Campaign, I am going to share everything related to housing.

Since a few years ago, the first thing that has to be ratified is the fiscal address. And here there are many options, since you can have a mortgage that is linked to your habitual residence or not, you can live or have a rented apartment, or simply live in a relative’s or friend’s house as usufruct.

What housing deductions are there in the Renta if you have a mortgage?

The first thing to take into account to know if you are eligible for any of the deductions for housing, is if it represents your HABITUAL HOUSEHOLD. If so, the first good news is that it is not taxed, it is considered exempt. The second good news is that you can deduct part of the payments linked to the mortgage.

To do so, keep the following in mind:

• • In order to apply the deduction for the principal residence, the mortgage loan had to be constituted before January 1, 2013 (and you had to have applied the deduction to deduct the mortgage in 2012 or in previous years).

• • If so, the amount to be deducted is 15% of the amount paid (in 2019 in this case) with a maximum amortized amount of €9,040. That is to say, we can save a maximum of 1.356€ in IRPF per year (0,15*9.040€=1.356€).

• • If there are two holders, it is divided in the proportional part that corresponds to each one.

Money saving tips:

• • In case of early amortization you could add the amount to your monthly payments, but remember that the limit is 9.040€ (you save interest and reduce the IRPF).

• • If there is a subrogation of the creditor (change of bank) you can still apply the tax credit.

• • If you take out a new mortgage to cancel the one you have, the Treasury applies the same criteria as for the subrogation (for the initial amount requested; if you ask for more money it is not taken into account).

What happens with mortgages contracted from 2013, especially if it was carried out last year? In this case I advise you to check the deductions of your own Autonomous Community. Many of them have reductions and tax advantages. If you need help with your Income Tax Return, especially to review this type of deductions, remember that you can contact and or request this procedure from our Store. The tax benefits at regional level are updated every year, and therefore it is advisable to consult a Tax Advisor.

What are the rental implications of having a second home?

If you have a second home, or several, consider it as an investment property and not only that, but also as a possible passive income. If you have it without renting it, not only you are not having any income, but also you have the obligation to pay taxes on it. That is to say, yes or yes you pay. Whether you receive income from the rent or not.

There are many cases where you have a second residence, or simply the proportional part of a property that you inherited. For the tax authorities it is an “economic capacity” that is to say, it offers you the opportunity to obtain an income.

How is it taxed?

The imputed rent will be 2% of the cadastral value of the property (or 1.1% if this value has been revised in the last 10 years).

I insist: if you have a second home, and you have not had it rented 365 days a year, you have to apply the “formula” above in the proportional part of the year that it has been “for your enjoyment”.

How is a rented property taxed for income tax purposes?

There can be 2 cases and the taxation is different.

1️ – USUAL RENT.

The income obtained from the rent is reduced by all the expenses necessary to obtain it (mortgage interest, maintenance and repair expenses, property tax, insurance, garbage and community fees, amortization of the property).
A reduction of 60% is applied to this result if it is the tenant’s main residence, and the net yield is obtained.

Note: This reduction does not apply if it is a seasonal or vacation rental, or if the premises are for a business.

GARAGES AND STORAGE ROOMS

The yield from parking spaces and storage rooms that are rented jointly with the dwelling is included in the yield obtained by the latter.

When they are rented separately, they are treated in the same way as any other property(the 60% reduction is not applied in the calculation of the yield because they are not the tenant’s habitual residence).

2 – TEMPORARY RENTAL OR AS TOURIST HOUSING

     The treatment is the same as in the case of the usual rental (permanent housing) with the difference that the expenses will be proportional to the time that the property was destined to this type of rental and it will also be taken into account that the 60% reduction will not be applicable.

What does it mean? That we have to make a rule of 3.

In general the expenses are usually annual (IBI, community, insurance, etc.) so you will have to take into account that you can only subtract from the income received the proportional part of the expenses.

EXAMPLE: The property was intended for tourist rental for 3 months. The expenses would be obtained in the following way: Total Expenses * 3/12 (months)
And for the remaining time, that is to say for what is missing until fulfilling the period of one year, it would be taxed for being a second home applying also the rule of 3.

What are the deductions for housing in the Renta if it is rented?

If you have managed to become independent and pay rent for your primary residence, you are also eligible for housing deductions in the Income Tax Return, and for this you must take into account the following!

• • In which Autonomous Community do you live. Most of them have a deduction in the IRPF and the percentage to apply varies a lot depending on the place.
    In each one the percentage varies depending on the age, if it is about localities with a very small number of inhabitants, if you have or not disability, if you do not exceed a certain amount in the taxable base and a long etc.

• • On the other hand, at state level there is a deduction for those tenants who have signed the contract before January 1, 2015 and whose taxable base is less than €24,107.20. The percentage to be applied is 10.05% (on a maximum base of €9,040) and affects only the full state tax liability.

If this is your case, you should know that it is compatible with the regional deduction.

This is the most relevant information that you have to take into account for your Income Tax Return, as far as housing is concerned, whether it is a habitual residence in property or not, as well as if it is a rented property or not. Remember that you can count on help or request a Consultancy to review your particular case from HERE.

Of course, if you have any questions, you can leave them in comments!

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