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Practical manual for Income Tax 2023.

Who is entitled to this deduction?

Taxpayers who meet the following requirements will have the right to apply the deduction regime for investment in habitual residence for the amounts paid in fiscal year 2023:

  1. If it is a purchase of a habitual residence, when the residence has been legally acquired prior to January 1, 2013 or after said date, provided that in the latter case amounts had been paid for its construction before January 1, 2013 and the completion of the works had occurred within the deadlines established by the applicable IRPF regulations, adding, where applicable, the suspension period established by the ninth Additional Provision of Royal Decree-Law 11/2020.

  2. In the case of renovation work on a habitual residence, when amounts have been paid for this purpose prior to 1 January 2013, provided that the works were completed before 1 January 2017.

  3. Taxpayers who had paid amounts prior to January 1, 2013 for works to extend their habitual residence, provided that the aforementioned works had been completed before January 1, 2017.

In any case, it is necessary that the taxpayer has applied the deduction for investment in habitual residence in relation to the amounts paid for the acquisition, construction, rehabilitation or extension of said residence in a tax period accrued prior to January 1, 2013, unless it could not have been applied because it did not exceed the amounts invested in previous residences, to the extent that they would have been subject to deduction by integrating effective deduction bases, plus, where applicable, the amount of exempt capital gains due to reinvestment.

Note: disappearance of the construction modality in 2022 and application of the transitional regime.

Article 55 of the Personal Income Tax Regulations , as amended on 31 December 2012, treated the “construction” of a primary residence as being equivalent to the acquisition of a primary residence in cases where the taxpayer had directly paid the costs incurred in carrying out the works or had paid amounts on account to the developer, provided that the works were completed within a period not exceeding four years from the start of the investment or, in the exceptional cases provided for in sections 3 and 4 of the aforementioned article 55 of the Regulations, an extension of said period was granted which could not exceed, in any case, another four years.

As a result of the above, the application of the transitional regime of the deduction in the form of "construction of the habitual residence" required:

1. That the taxpayer had applied the deduction for investment in habitual residence in relation to the amounts paid for the construction of said residence in a tax period accrued prior to January 1, 2013 (unless the provisions of article 68.1.2 of the Income Tax Law had been applied in its current version as of December 31 2012) and

2. That the aforementioned works, computed within the 4-year period, had been completed, in any case , before January 1, 2017 or, in the case of an extension, at most until March 19, 2021, also producing the legal acquisition of the home.

Precision: For the purposes of calculating the four-year period in the case of an extension of the deadline for completion of the works and legal acquisition of the home under the terms indicated, the period from March 14 to May 30 has not been taken into account, pursuant to the provisions of the Ninth Additional Provision of Royal Decree-Law 11/2020, of March 31, by which urgent complementary measures are adopted in the social and economic field to face Covid-19 ( BOE of April 1) and the modification of the temporal references provided for in the First Additional Provision of Royal Decree-Law 15/2020, of April 21, on urgent complementary measures to support the economy and employment ( BOE of April 22). Therefore, the deadline for the completion of the works and legal acquisition of the home expired on March 19, 2021.

For these purposes:

  • In cases of construction through direct execution by the taxpayer - self-promotion -, the legal acquisition is understood to be obtained with the completion of the works, a fact that must be able to be duly proven, taking the date of the deed of declaration of new construction in its absence.

  • In cases of construction through delivery to a developer or cooperative, the legal acquisition is deemed to have been obtained in accordance with the provisions of the Civil Code, when the contract (title) and the tradition or delivery of the dwelling (method) are present.

In accordance with the above, in fiscal year 2023 in cases of construction of a habitual residence, once the deadlines have been met, to continue applying the deduction the completion of the works and the legal acquisition of the home must have occurred in the aforementioned terms before March 20, 2021 . For this reason, the taxpayer who uses external financing may continue to practice the deduction for the amounts paid in the year (principal and interest) for the construction of the habitual residence under the heading "Acquisition and/or construction of the habitual residence of the habitual residence" in Annex A.1 of the declaration, but must record as additional data in the IRPF declaration the date of the deed of acquisition or new construction of the home.