Deduction for rental of the residence: Transitional scheme

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Regulations: Fifteenth transitional provision Law IRPF ; Articles 67.1, 68.7 and 77.1 Law IRPF , in its version in force on December 31, 2014

Law 26/2014, of November 27, which modifies Law 35/2006, of November 28, on Personal Income Tax, the revised text of the Non-Resident Income Tax Law, approved by Royal Legislative Decree 5/2004, of March 5, and other tax regulations ( BOE of March 28) abolished, as of January 1, 2015, the deduction for rent of the habitual residence.

However, for taxpayers who were deducting their rent prior to that date, a transitional regime was introduced that allows them to continue enjoying the deduction under the same terms and conditions existing on December 31, 2014.

To whom does the transitional regime apply?

Taxpayers who meet the following conditions may apply the deduction for renting their habitual residence:

1. Those who had entered into a lease agreement prior to January 1, 2015 and continue with the same lease agreement (either through successive extensions or by signing another agreement that is considered a continuation of the initial lease agreement).

   The taxpayer will be entitled to the deduction for renting a habitual residence during the tax periods in which, as a result of its extension, the validity of the lease contract signed prior to January 1, 2015 remains in effect.

   However, the signing of a new lease contract for the same habitual residence at the end of the initial contract or to modify the agreed conditions, including, among others, the rental price, is considered, for the exclusive purposes of applying the transitional regime, as a continuation of the previous one, and therefore will not prevent the right to continue applying the deduction.

   Likewise, for the exclusive purposes of applying the transitional regime, the signing of a new lease contract will be considered as a continuation of the previous one in the event of a change of landlord due to the transfer of the property, such as the replacement of the former landlord by his heir due to the death of the former, sale or payment in kind.

2. That under said contracts they had paid, prior to January 1, 2015, amounts for the rent of their habitual residence.

3. That they would have been entitled to the deduction for rent of their habitual residence in a tax period accrued prior to January 1, 2015, even if they had not exercised such right.

   Therefore, the transitional regime will apply if the contract was signed before 2015 even if the deduction for rent of habitual residence was not applied in 2014 and/or previous years despite having met the requirements for its application.

How the deduction is applied in the transitional regime

The fifteenth transitional provision of the Personal Income Tax Law maintains, for taxpayers who are entitled to the transitional regime, the application of the regulations contained in articles 67.1, 68.7 and 77.1 of the Personal Income Tax Law , in its version in force on December 31, 2014.

Amount and requirements for applying the deduction

Without prejudice to the deduction for rent of habitual residence that, where appropriate, each Autonomous Community has approved for the year 2023, taxpayers may deduct 10.05% of the amounts paid in tax period for the rent of their habitual residence, provided that their taxable base is less than 24,107.20 euros per year.

The taxpayer's taxable base is formed by the sum of the amounts entered in boxes [0435] (general taxable base) and [0460] (savings taxable base) of the declaration.

Deduction base

In addition to the rental amount, this will include the expenses and taxes that the landlord must pay as the owner of the property and that, according to the conditions of the lease contract, are passed on to the tenant, such as Community of Owners fees and Property Tax.

The deduction base will not include the amount of the Fee for the Provision of Urban Waste Management Services, in which the tenant is a taxpayer, nor the amount of the costs of supplies for the rented home (water, electricity, gas, ) that correspond to the consumption of supplies for the taxpayer's own home, the costs of small repairs required due to wear and tear from ordinary use of the home and which must be borne by the tenant in accordance with the provisions of section 4 of article 21 of Law 29/1994, of November , on Urban Leases (BOE of November ).

However, the amount of the home insurance premium that covers the building's contents, and which is required by the landlord, will form part of the basis for the deduction.

Maximum deduction base

The maximum base for this deduction is:

1. 9,040 euros per year , when the taxable base is equal to or less than 17,707.20 euros per year.

2. 9,040 – [1.4125 x ( BI – 17,707.20)] , when the taxable base is between 17,707.20 and 24,107.20 euros per year.

   BI being the taxpayer's taxable base. That is, the sum of the amounts reflected in boxes [0435] (general tax base) and [0460] (savings tax base) of the declaration.

Note: Taxpayers entitled to apply the transitional regime whose taxable base, in the terms discussed above, is equal to or greater than 24,107.20 euros per year, in individual taxation or joint taxation, will not be able to apply this deduction.