Practical case

The marriage composed by Mr. RJR and Dona MAT, resident in Seville, has had two homes rented throughout 2022. The list of income, expenses and other data of interest for determining net performance are as follows:

1. First home rented for 900 euros per month.

The home was acquired in 2002 for an amount equivalent to 90,000 euros, plus 7,000 euros in expenses. For its acquisition, they requested a mortgage loan from Bank "Z" for which they have paid throughout 2022 the amount of 400 euros of interest and 2,200 euros of capital amortization. The cadastral value of said home, which has not been reviewed in the last 10 years, amounts to 66,200 euros, of which 27,080 euros correspond to the value of the land and 39,120 euros to the construction value. According to the data, the IBI receipt for the fiscal year 2022, its cadastral reference being 4927802TG3442F0088ZR.

The cost of acquiring the furniture installed in the home, according to the 2015 invoice, amounts to 6,900 euros. The expenses met in 2022 for said home have been the following:

Real Estate Tax (IBI): 260.00
Community: 850.00
Facade plaster: 210.00

2. Second home rented to a brother of Mrs. MAT, for 300 euros per month.

The home was acquired in 2007 for 45,000 euros, including the expenses inherent to said acquisition. The cadastral value of the home amounts to 13,800 euros, of which 4,830 euros correspond to the value of the land and 8,970 euros to the value of the construction. Said cadastral value has not been reviewed in the last 10 years. The cadastral reference of said home is 4927802TG3442F0134YK.

The expenses of this home throughout 2022 have been as follows:

Real Estate Tax (IBI): 91.00
Loan interest: 4,200.00
Capital amortization: 1,202.00
Community: 720.00
Air conditioning installation (01-07-22): 1,500.00

Determine the reduced net return on real estate capital corresponding to said homes in fiscal year 2022, in the case of joint taxation.

Solution:

1. First rented home:

Full income (900 x 12) 10,800.00

Deductible expenses :

Interest on the capital invested in the acquisition of the home (mortgage loan) ⁽¹⁾: 400.00
Repair and conservation costs ⁽¹⁾: 210.00
Taxes, surcharges and fees (IBI): 260.00
Community fees): 850.00
Amortization:
- * Housing (3% x 58,200) ⁽²⁾ = 1,746.00
- * Furniture (10% s/6,900) ⁽³⁾ = 690.00

Total deductible expenses: 4,156.00

Net return (10,800 – 4,156) = 6,644.00

Reduction for housing lease (60% /6,644) = 3,986.40

Reduced net return: (6,644.00 – 3,986.40) = 2,657.60

Notes to the solution to question first rented home :

⁽¹⁾ The total amount to be deducted for interest on foreign capital invested in the acquisition of the property and the costs of repair and conservation of the property will be limited to the amount of the full income obtained. The excess may be deducted in the following four years (article 23.a).1 of the Personal Income Tax Law ). In this case the total amount (400 + 200 = 600 euros) is much lower than the full returns (10,800 euros). ^{(Return interests)} ^{(Return repair costs)}

⁽²⁾ To determine the amounts destined for the depreciation of the real estate, take into account the following data:

Cadastral value: 65,200 euros

Cadastral construction value: 39,120 euros

% cadastral construction value/cadastral value [39,120 ÷ 65,200) x 100] = 60%

Acquisition cost (including expenses associated with the purchase) (90,000 + 7,000) = 97,000 euros

Acquisition cost, excluding the value of the land (97,000 x 60%) = 58,200 euros

In accordance with article 14.2.a) of the Personal Income Tax Regulations, amortization may not exceed, in each year, the result of applying 3 percent to the highest of the following values: cadastral construction value (39,120 euros) or acquisition cost, excluding the land (58,200 euros). ^(Back)

⁽³⁾ In accordance with article 14.2.b) of the Personal Income Tax Regulations, amortization may not exceed, in each year, the result of applying the determined amortization coefficients to the acquisition costs paid for the acquisition of the furniture (transferred together with the home). in accordance with the simplified amortization table approved by Order of March 27, 1998 referred to in article 30.1. of the aforementioned Regulation, that is, 10 percent. ^(Back)

2. Second home rented to a family member.

The highest value of:

2.1 The difference between full income and deductible expenses.

Full income (300 x 12) = 3,600

Deductible expenses :

Interest on the capital invested in the acquisition of the home (mortgage loan) ⁽¹⁾ : 3,600

* Limit: full income: 3,600 euros

* 2022 amount pending deduction in the following 4 years: 4,200 -3,600 = 600
Taxes, surcharges and fees (IBI): 91.00
Community fees: 720.00
Amortization:

* Housing (3% x 29,250) ⁽²⁾ = 877.50

* Air conditioning [6/12 x (10% s/1,500] ⁽³⁾ = 75

Total deductible expenses: 5,363.50

Net return (3,600 – 5,363.50) = -1,763.50

Home rental reduction ⁽⁴⁾ : 0

Reduced net return: -1,763.50

2.2. 2 percent of the cadastral value (2% x 13,800) = 276

Net performance:

The highest value of the two calculated in letters a) and b) will be declared. That is, 276.

Notes to the solution for the second rented home :

⁽²⁾ To determine the amounts destined for the depreciation of the real estate, take into account the following data:

Cadastral value: 13,800 euros

Cadastral construction value: 8,970 euros

% cadastral construction value/cadastral value [8,970 ÷ 13,800) x 100] = 65%

Acquisition cost, excluding the value of the land (45,000 x 65%) = 29,250 euros ^(Back)

⁽⁴⁾ The reduction for leasing properties used for housing does not apply because the net return is negative. ^(Back)

3. Sum of reduced net returns on real estate capital

The sum of reduced net returns on real estate capital from the two leases: (2,657.60 + 276) = 2,933.60