Skip to main content
Practical manual for Income Tax 2023.

Interest and other expenses for financing, conservation and repair of the property

Regulations: Articles 23.1 a) 1 Law IRPF and 13 a) Regulation IRPF

The following are considered to be included among the expenses necessary to obtain the returns, among others:

1. Interest and other financing costs

Interest and other financing costs of third-party capital invested in the acquisition or improvement of the asset, right or faculty of use or enjoyment, as well as, where applicable, the assets transferred with it, are deductible.

Financing costs include the premiums for life insurance taken out with the financial institution that granted the loan for the acquisition of the property, provided that the contracting of said insurance is included in the lender's conditions for granting it. That is to say, the consequence of not taking out the aforementioned life insurance must be the impossibility of accessing said loan.

The deductibility of these expenses only applies (due to the necessary correlation of expenses with income) with respect to the part of the tax period in which the property is rented, that is, they are calculated proportionally to the number of days of the tax period in which the property is rented.

Therefore, the interest and other financing costs corresponding to the period of time prior to the formalization of the lease contract will not be deductible.

Important:the interests that, due to the application of floor clauses, would have been satisfied by the taxpayer in 2023 and with respect to those that, before the end of the deadline for submitting self-assessment of Personal Income Tax for said year ( July 1, 2024), the agreement to refund the amount is reached with the financial institution or as a consequence of a court ruling or arbitration award, they cannot be deducted as an expense. See Chapter 2 .

2. Conservation and repair

The costs of maintenance and repair of the assets that generate the income are deductible. For these purposes, the following are considered:

  1. Those carried out regularly for the purpose of maintaining the normal use of material assets, such as painting, plastering or repairing facilities.

  2. Those for replacing elements, such as heating systems, elevators, security doors or others.

Amounts used to expand or improve assets are not deductible under this concept, as they constitute a higher acquisition value whose recovery is carried out through the corresponding amortizations.

The deductibility of pre-lease expenses is conditional on obtaining income, that is, full returns on real estate capital: those arising from the leasing or from the constitution or transfer of rights or powers of use or enjoyment of real estate or property rights that affect the same.

The existence of a correlation between maintenance and repair costs and the income derived from the subsequent leasing of the property means that maintenance and repair costs incurred on a property for the purpose of leasing it (that is, those incurred in the period of time prior to the formalization of the lease contract) will be considered deductible for the determination of the net return on real estate capital, provided that they are directed exclusively to the future obtaining of returns on real estate capital (through leasing or the creation or transfer of rights of use and enjoyment) and not to the enjoyment, even temporary, of the property by the owner. If in the year in which the expenses are incurred the taxpayer does not obtain capital gains from the property, the repair and maintenance expenses may be deducted in the following four years, respecting the legally established limit each year. 

Maximum deduction limit for the two necessary expense concepts above

The following should be taken into account:

a) The maximum total amount to be deducted for interest and other financing costs and for maintenance and repair costs may not exceed, for each asset or right, the amount of the gross income obtained.

The excess may be deducted in the following four years, without exceeding, together with the expenses for these same concepts corresponding to each of these years, the amount of the gross income obtained in each of these years, for each asset or right.

b) The amount pending deduction for the years 2019, 2020, 2021 and 2022 will be applied in the declaration of 2023 with priority to the amounts that correspond to the fiscal year 2023 itself for these same concepts. The amount to be deducted will be entered in box [0104] of the declaration.

For its part, the amount corresponding to the year 2023 that is applied in the declaration will be indicated in box [0107] and the amount that, due to the application of the maximum deduction limit, remains pending deduction will be recorded in box [0108 ] for the purposes of deduction in the following four years.

In the event that there are several lease contracts in the year for the same property, the maximum limit of the amount to be deducted for interest and maintenance and repair expenses must be calculated taking into consideration the amounts paid in the year and the total income obtained in it, so that, for some of the lease contracts, the amount deducted for interest and maintenance and repair expenses could exceed the income obtained.