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Practical manual for Income Tax 2021.

Other conditions for the application of the deduction

In order to determine the basis for the deduction, i.e. the amounts invested with the right to deduction, the following special rules must be taken into account, in addition to the requirements indicated above:

  • When a primary residence is acquired after having enjoyed the deduction for the acquisition of other previous primary residences , deductions cannot be made for the acquisition, rehabilitation or extension of the new residence until the amount invested in it exceeds the amounts invested in the previous residences that have enjoyed the deduction.

  • When the transfer of the habitual residence has generated an exempt capital gain through reinvestment , the deduction base for the acquisition, rehabilitation or extension of the new habitual residence will be reduced by the amount of the exempt capital gain, and deductions cannot be made until the amount invested exceeds the sum of the purchase price of the previous residences, to the extent that it has benefited from a deduction, plus the exempt capital gain on the previous ones.

Likewise, when the transfer of the habitual residence had generated a partially non-taxable capital gain by application of the ninth transitional provision of the Personal Income Tax Law (because the acquisition date was prior to December 31, 1994), the deduction for the acquisition of the new residence may not begin until the amount invested in it exceeds the amounts invested in the previous habitual residences, to the extent that they had enjoyed a deduction, plus the capital gain that is exempt from reinvestment.

The application of the reduction or abatement coefficients to determine the part of the capital gain obtained from the transfer of homes acquired before December 31, 1994 that is not subject to Personal Income Tax by application of the provisions of the ninth transitional provision of the Personal Income Tax Law is discussed in more detail in Chapter 11.

Remember: Taxpayers who have paid amounts for the construction of their primary residence prior to January 1, 2013 and have completed the work will be entitled to continue to claim the deduction under the "primary residence acquisition" modality when they have used external financing, and meet the requirements of completion on time, occupation and effective and permanent residence provided for it.