State allowances basically intend to encourage certain investments for economic policy reasons. What concerns us today is the deduction for the housing on the primary residence so it allows to deduct for the purchase of a house, as long as the requirements that will be detailed below are accomplished. In addition you can also deduct for the rental in certain cases, for rehabilitation and expansion and acquisition similar amounts.
Currently, these deductions have been removed. However, for owners or tenants who acquired / rented homes before a certain date, deduction, although reduced, is maintained.
The purpose of this article is to explain the deductions currently in force.
1. Deduction for investment in housing.
It is considered a primary residence when the following:
- The taxpayer must reside for a continuous period of at least three years from acquisition
- And the house must be inhabited effectively and permanently by the taxpayer within 12 months of its acquisition or completion of works.
In both cases they will take into account certain exceptional circumstances that could prevent its compliance as they necessarily prevent the occupation of housing or require a change of housing, such as a marital separation, work relocation…
In addition we should know that it is considered as residence the garage spaces (up to 2), storage rooms, gardens, parks, swimming pools and sports facilities that were not purchased independently of it.
The home investment should be reflected in the acquisition thereof, rehabilitation or for acquisition similar amounts as those for enlargement (under certain conditions).
Until 2012 we could deduct the investment for the above mentioned primary residence, but with effect from 1 January 2013 the deduction for investment in housing was removed and consequently its corresponding regional section. Therefore, those who have bought their home from this date in advance will not be able to enjoy any tax advantage in this field. However, there is a transitional regime with which it still is able to apply the deduction in the following cases:
a. Acquisition of residence
Purchased prior to January 1, 2013.
The payment can be in cash or in installments. It is usually produced by external financing, by a mortgage loan, which allows applying the deduction as they’re being payed the interest and the capital in each tax period.
You should know that actually everyone can deduct for buying a home regardless of their salary. However, there is a limit on the amounts that can be tax deductible; the percentage specifically to deduct is 15% of the amounts paid (including principal and interest) to a maximum of 9,940 euros per year.
b. Rehabilitation
In order to continue applying the deduction amounts must have been satisfied for rehabilitation before 1 January 2013, and they must be completed before 1 January 2017. These rehabilitation works may deduct as long as:
– They have been declared as protected action on housing rehabilitation or whose main purpose is the reconstruction of housing through consolidation and treatment of structures, facades and roofs
– And the total cost exceeds 25% of the purchase price if it is bought in the last two years or the market value of housing that had at the beginning of the works.
c. Analogue to acquisition amounts
They are those intended to the expansion of the house by a permanent enclosure or construction and those intended to the adjustment of the residence facilities for persons with disabilities. They must have been paid before January 1, 2013 and must be completed before January 1, 2017.
We also need to know that they are only deductible as long as the taxpayer is who meets directly the costs of works.
2. Deduction for rental of the residence.
Renting the residence can also be deducted by the lease. However, as has happened with the deduction for housing, this deduction has also disappeared. Thus, until December 31, 2014, the tenant could deduct in 10.5% of the amounts paid for the rent of the residence, as long as their taxable income did not exceed 24,107.20 euros. But from January 1, 2015 such deduction has been removed. However, you can still apply for it when following conditions are met:
- That had held the lease before January 1, 2015.
- That had satisfied amounts by renting their residence before that date.
- And that they accomplished the requirements for the deduction according to the legislation before 1 January 2015.
The maximum amount of rent that can be deducted is 9,040 Euros that will be also applied in full depending on the taxable income of the taxpayer (there is a scale).
We hope this article will serve you as a practical guide in order to take advantage of deductions on the acquisition, rehabilitation and rental of the primary residence. However, it never hurts to have some professional advice on the subject. For any tax consultation do not hesitate to contact us.
