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Practical Income Manual 2021.

Amounts paid with the right to deduction and maximum deductible base

Basis of deduction

Subject to the limit of 9,040 euros, the base of the deduction is constituted by the amounts paid by the taxpayer in year for the acquisition, construction, rehabilitation and extension of the habitual residence, including the expenses and taxes incurred that have been borne by the taxpayer, such as Tax on Property Transfers and Documented Legal Acts, VAT , architect and surveyor fees, construction license, declaration of new construction , notary and registration expenses, agency expenses, etc.

In the case of investment through external financing , the deduction will be made as the principal of the loan is repaid and, if applicable, the corresponding interest is paid, as long as all the requirements are met. requirements required for the application of the deduction.

The novation, subrogation or substitution of a loan or credit for another, including its extension, whatever the agreed form - with the guarantees and conditions that any of them have - does not mean understanding that at that moment the financing process concludes. of the corresponding investment nor that the possibilities of making the deduction are exhausted. It only implies the modification of the initially agreed financing conditions, provided, obviously, that the resulting loan is effectively dedicated to the amortization of the previous one.

Therefore, the annuities (amortization fee and interest) and other amounts that are satisfied by the resulting loan or credit - in its constitution, life and cancellation -, in the proportional part that, of the total capital obtained in it, is attributable to The amortization or cancellation of the original loan - when it has been destined exclusively for the acquisition of the habitual residence -, including, where applicable, the cancellation of the mortgage registry, will give the right to a deduction for investment in the habitual residence, forming part of the deduction base of the tax period in which they are satisfied, provided that the other legal and regulatory requirements are met. In the case of an increase in the principal, if the entire amount is used to strictly cover the costs associated with the cancellation of the original loan, it may also be subject to deduction. On the contrary, the proportional part of the indicated annuities that corresponded to the increase in the principal, which would have been used to finance other things, other than the acquisition of the home itself, will not be susceptible to integrating into the deduction base, whatever it may be. .

Regarding the new loan or credit, the taxpayer must be able to prove its destination linked to the home and the justification for its return.

In the case of the taxpayer who, by virtue of a divorce court decree, satisfies all the payments of the loan for the acquisition of the habitual residence that was once granted jointly to both spouses and for the repayment of which both had been practicing before 1 January 2013 the deduction for the acquisition of a habitual residence, you have the right to apply said deduction for the entire amounts paid for this concept even if you only own 50% of the home because the community property has not been liquidated, both in the event that the home continues to have habitual status for him and the common children and in the event that the home has this status for the common children and the other parent. See in this regard the Resolution of the TEAC of November 23, 2021, Claim number 00/00629/2021 , relapse in extraordinary appeal in unification of criteria. 

In these cases, will form part of the basis of the deduction, in addition to the amortization of capital and interest, the other expenses derived from said financing among which the following can be mentioned:

  • The cost of interest rate risk hedging instruments for mortgage loans regulated in article nineteen of Law 36/2003, of November 11, on economic reform measures ( BOE of 12). In the case of application of the aforementioned hedging instruments, the interests paid by the taxpayer will be reduced by the amounts obtained by the application of the aforementioned instrument.

  • The premiums for life and fire insurance contracts , provided that they are included in the conditions of the mortgage loans obtained for the acquisition (or, where applicable, for the construction), rehabilitation or extension of the habitual residence.

Note: in accordance with Additional Provision forty-fifth Law Personal Income Tax will not be included in the base of the deduction for investment in habitual residence or the deductions for this concept established by the Autonomous Community the following amounts:

  • The amounts that, due to the application of floor clauses, would have been paid by the taxpayer in 2021, when before the end of the self-assessment submission period for Personal Income Tax for said year, an agreement to refund the amount is reached. the same with the financial entity, or such return proceeds as a consequence of the execution or compliance of judicial sentences or arbitration awards.

  • Those amounts paid in previous years by the taxpayer in application of the floor clauses subject to the refund that are allocated directly by the financial institution in the year, after the agreement with the affected taxpayer, judgment or arbitration award, to reduce the principal of the loan. .

Maximum deductible investment base

Regulations: Art. 68.1 1 Law Personal Income Tax , drafted on 12-31-2012

The maximum deduction base for investments in the acquisition, rehabilitation or extension of the primary residence is 9,040 euros per year .

This limit will be unique for all of the investment concepts outlined and will apply in the same amount in joint taxation .

The excess of the amounts invested over these amounts cannot be carried over to future years.

In the event of termination of a condominium over the habitual residence as of January 1, 2013, if one of the parties obtains 100 percent of the residence, they will have the right to apply 100 percent of the deduction for acquisition of habitual residence , up to a total of 9,040 euros of base, provided that said deduction had been applied in a year prior to 2013 in the percentage corresponding to their participation in the condominium.

In this case, the application of the deduction by the acquired part until 100% of the full ownership of the property is completed will be limited to the amount that the community member who ceases to be the owner of the condominium would have had the right to deduct from the date of termination of the condominium. property if said extinction had not taken place. The deduction will also be conditional on the fact that the community member who ceases to be the owner has not exhausted the possibility of continuing to take the deduction for the acquisition of a habitual residence on the date of termination of the condominium. See in this regard the Resolution of TEAC of October 1, 2020, Claim number 00/00561/2020, relapse in extraordinary appeal for unification of criteria.