Faq

Basically you can obtain deductions on your Income Tax and in the taxes at the time of making the purchase.

Not all investments in property are going to have tax advantages, only those that refer to our permanent home. Our permanent home is considered to be is that which has been the place of our continuous residence fro at least three tears, excepting circumstances that demand a change of home before time, such as a change of job, a marriage, separation,…, and, actually, any fact that supposes the change from the permanent home and has its justification. On the other hand, second homes, as could be those used in the summer, the apartment on the beach or in the mountains, will not receive these tax advantages.

The tax deduction that will be applied is, generally speaking, 15% of the amount we pay for the purchase of the home (in this 15% we include the part that corresponds to the state –10.05%-, and that we corresponds to the Autonomous Communities –4.95%-, although each Autonomous Community can regulate a different type of deduction), to be included here not only the price of the home but also the taxes paid (VAT,Propety Tax-ITP,Documented Legal Acts-AJD), the costs of the public notary, registry, bank commissions, interest on the loan,… If the loan obtained to purchase your permanent home has come from a person (a relative, a friend,…), the quotas for repaying this loan will also be deductible as long as there is some proof of their authenticity (contract, deed…).

However, the maximum base limit for deduction (that is the amount on which these percentages are applied) is 9,015.18 euros a year. That means, even though this year we pay 20,000 euros on the concept of our mortgage, the maximum amount that will be taken into account for the15% deduction on the home will be 9,015.18 euros.

For 2003 the Andalusian Government included a new additional deduction of 2% on satisfied amounts, following the same requirements and conditions laid down in the state regulations, as well as other additional requirements, which are these:

- That the taxpayer is under 35 years of age or that the home is officially under government protection (VPO). In the case of a joint declaration, at least one of the couple must comply.

- The general Income tax base of the person involved should not exceed 18,000 euros in their individual declaration or 22,000 euros if it is a joint declaration.

The indicated limit of 9,015.18 euros will be applied to each declaration, so that if a married couple each present an individual declaration each will have a limit of 9,015.18 euros. But if they present a joint declaration, the limit is still 9,015.18 euros. Therefore, although they have the right to present a joint declaration it may well be in their interest to present each their own.

As a consequence and speaking in general terms, the tax deduction on the purchase of the building will be 15% x 9,015.18 euros = 1,352.28 euros, which could lower the amount to be paid to the Inland Revenue or increase the amount to be returned.

However, the percentage of the deduction could be increased from 15% to 25% (16.75% corresponding to the Central Tax Offices, and 8.25% corresponding to the autonomous communities, which can modify their percentage) for the first 4,507.59 euros of the investment in the home, while the general deduction of 15% is maintained for the remaining 4,507.59 euros, if you comply with a series of requirements:

- That external financing is used in the purchase of the home.
- That the amount of financing should be at least 50% of the value of the purchase of the home.
- That during the first three years, not more than 40% should be paid on the amount of the mortgage.

After two years the percentage is reduced from 25% to 20%.

This means, in the most advantageous case, and during two years there would be a deduction of:

25% x 4.507,59 = 1.126,89 euros
15% x 4.507,59 = 676,14 euros
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A total deduction of 1,803.03 euros

The investment in the so called “home savings accounts” offer a general tax saving of 15% of the amount saved, (in this15% we include the deduction corresponding to the state 10.05%, and that corresponding to the Autonomous Communities 4.95%, even though each Autonomous Community can regulate a different type of deduction), with the maximum base of deduction being (just as in the case of deduction for investment in a home) 9,015.18 euros.
The maximum saving we can hope to obtain is:

15 % X 9.015,18 = 1.352,28 euros

In this case, it must be remembered that the maximum period for investing in a home is four years (starting from the moment you open the account), and that this money cannot be used for anything other than buying a home and only includes an account with a right to a deduction.

In conclusion, investing in a home always has tax advantages. On the other hand, to take full advantage of the deductions covered by law, one should try to adjust the amounts paid on the mortgage or that invested in the savings account to 9,015.18 euros each year, taking into consideration, for couples, if you are going to make individual or joint declarations.

In reference to taxes on the change of permanent home, when you purchase a permanent home after having received deductions on the purchase of previous permanent homes, there will be no deductions as long as the amount invested in the new home do not exceed the amount invested in the previous ones which did receive deductions.

If in the sale of the permanent home there has been a gain in patrimony that is exempt through reinvestment, it would also be necessary to make a corresponding reduction on the base.

Lastly, in the case of Andalusia, there are reductions in taxes for people complying with certain requirements: young people under the age of 35 who purchase a home with a value of up to 130,000 euros, and for homes under government protection (VPO); in both cases, the Tax on Property Transfer (ITP) is reduced from 7% to 3.5%, and the Tax on Documented Legal Acts (AJD) is reduced from 1% to 0.3%.