What is IRPF tax for a home?

A home pays taxes when a sale is made, but also by the mere fact of its possession, since its owner has to pay local taxes such as the IBI, take into account the income imputed in the IRPF or face the wealth tax, in certain cases.

The Personal Income Tax (IRPF) is a tax that taxes income obtained by natural persons residing in Spain. In the context of the sale of a house, personal income tax is applied to the capital gains that are generated as a result of the transaction.

The IRPF on the sale of a house is the tax that is applied on the capital gains obtained from the difference between the sale price and the acquisition price of the property. This tax is calculated and paid during the annual income tax return corresponding to the fiscal year in which the sale was made.

Personal income tax is paid to the Treasury and is calculated based on capital gains, both from this operation and from any other economic activity.

How is the personal income tax on the sale of a flat calculated?

It is considered that there is a capital gain when there is an economic benefit thanks to the sale. If the sale price is greater than the price paid when purchasing the home, the Treasury understands that there is a profit and, therefore, that money is recorded in personal income tax in the annual income tax return, according to certain scales.

To calculate the benefit, these factors must be taken into account:

• Value of the property: to the purchase price at the time you must add what you have invested in both home improvements and renovations and taxes. All this causes the value of the property to increase.
• From that figure you must subtract the amortizations and whether there were tax benefits for having rented the home. Taxes and expenses incurred during the sale (such as mortgage cancellation, real estate fees, etc.) must also be deducted from the possible capital gain.

If after all of the above there is a capital gain, personal income tax is applied. The percentage varies depending on the benefit:

• Up to 6,000 euros, a 19% personal income tax applies.
• Between 6,000 and 50,000 euros, the tax is 21%.
• Between 50,000 and 200,000 euros, 23% of personal income tax.
• More than 200,000 euros, the percentage to pay is 26%.

When is the personal income tax payment made to the Treasury?

Personal income tax is calculated each year in the Income Tax campaign and based on the benefits – of any type – that have been obtained during the previous year. The Income Tax campaign begins at the beginning of April, when you can request a draft of it to verify the data or modify what is necessary. The deadline for submitting the Income Tax ends at the end of June and that is also the deadline to make the payment of the declarations with results to be entered, such as the profit from the sale of a flat.

Exceptions in the payment of personal income tax after selling a home:

• When the seller is over 65 years old or is a dependent person, he or she will be free of tax on the sale of his or her habitual residence.
• If the home sold is the habitual residence and all the money obtained is reinvested in the purchase of another habitual residence. That is, if you sell your apartment and invest the total in buying another one where you are going to live, you will not have to pay this tax to the Treasury.
• In the case of dacion en pago, when the sale transaction is to satisfy a mortgage debt. In this case, it is understood that you are not selling your apartment to obtain an economic benefit, but to close a debt. Therefore, since there is no performance, no withholdings are applied.

These exceptions reflect the importance of understanding the details and nuances of the tax system as it relates to home ownership and real estate transactions.

Proper tax planning can help property owners minimize their tax burden and optimize their financial situation in the context of real estate. Therefore, it is essential to seek professional advice and be informed about the tax regulations applicable in each particular situation.