Property and State Level Income Tax Deductions in Spain
Income Tax Deductions in SpainThere are 17 autonomous communities or regions in Spainand each has competency to regulate tax exemptions anddeductions within it’s territory.
Income Tax Deductions in SpainHowever, the central state government also regulates incometaxes.
Income Tax Deductions in SpainBoth systems work together in a complex arrangement thatmeans that taxpayers pay a proportion of their taxes to thecentral government and the remainder to their localgovernment.
Income Tax Deductions in SpainSo when we refer to a tax deduction available for a particulartype of income, that this may not be the whole story.Additional deductions, with different qualifying criteria , mayalso exist, at a local level. A list of the regional deductionscurrently available can be found on the main ‘Buying Propertyin Spain page.
Income Tax Deductions in SpainA number of important deductions are available to those whopay income tax and have dealings with property in Spain.It must be said however, that perhaps the most important one– deductions for investment in a family home – has recentlyhad its ambit reduced substantially.
Investment in the Principal Private ResidenceThis tax deduction is still available but only for those onincomes if less than €24,107. For those acquiring homes fromJanuary 1st 2011, the deduction is as follows:
Principal Private Residence Mortgage ReliefFor those with a net income below €17,707 the deduction isequal to 7.5% (plus any additional deduction approved at aregional level, if any) of any mortgage used to purchase aprincipal private residence up to a maximum taxable base of€9,040 (i.e. 7.5% of 9,040)
Principal Private Residence Mortgage ReliefThe deduction is also available when opening a special bankaccount (cuenta vivienda) for the purpose of saving to buy ahome, at the same rate.
Principal Private Residence Mortgage ReliefWhere the net income is between €17,707 and €24,107 thenthe deduction is 7.5% (plus any regional deduction, if any) ofthe following amount: 9.040 – 1,4125 x (net income –17.707,20).
Homes bought before January 1st 2011Where the home was acquired before this date, the olddeduction of 15% up to a maximum of €9,040 applies.
Exceptions to the Maximum Income LimitSome regional governments permit those on higher incomes tobenefit from a tax deduction (available at the regional level inaddition to the state deduction)
Deductions in the Canary IslandsThe government of the Canary Islands permits the followingdeductions for the purchase of homes in the region:1.15% on tax base up to €9,015 if net income €30k - €60k1.55% on tax base up to €9,015 if net income €12k - €30k1.75% on tax base up to €9,015 if net income < €12k
Deductions in ValenciaThe regional government in Valencia, which has responsibilityfor the Alicante area, permits the following deductions onhomes purchased after January 20th 2006:3.3% to a maximum of €4,507 for the 2 years after purchase1.65% to a maximum of €4,507 thereafter
Deductions in MadridThe regional government in Madrid has opted to continue thedeductions as previously was the case before the change tothe law.Accordingly there is currently a 15% deduction up to amaximum of €9,040 for the purchase of a home.
Deductions in MadridIf the home is of new construction an additional 1% may bededucted with the same limits as for the purchase of a second-hand property.
Deductions in Castilla La ManchaAn additional 1% above the state deduction for the purchase ofa principal private residence is available in Castilla la Manchawhere the net income of the individual is below €50,000
Deductions for Modifications made to the HomeModifications and installations made to a principal privateresidence so that it is made accessible to a disabled owner ofthe property, or spouse or relative living there are taxdeductible.
Deductions for Modifications made to the HomeThe maximum taxable base is €12,020 per annum and thedeductible rate is 10%.The need to make improvements for the purpose ofaccessibility must be certified by the competent authority.
Income Tax Deductions for Renting a HomeIf a person is renting their principal private residence, they maymake deductions in the income tax as follows:The rate is 10.05% and applies to a maximum base of €9,015where the income is less than €12,000 per annum
Income Tax Deductions for Renting a HomeThe maximum income to qualify for the deduction is €24,020and a sliding scale applies until €12,000.To calculate the deduction if net income is over €12,000 andbelow €24,020 the following formula is used: 9,015 – [0.75 x (Net Income - €12,000)]
Income Tax Deductions for Home RefurbishmentTaxpayers may deduct 20% of investments in propertyrefurbishment made up until the end of 2012.The maximum base is €6,750 which is applicable to those onincomes up to €33k. A sliding scale reduces this amount tozero as the income approaches a limit of €53k.
Income Tax Deductions for Home RefurbishmentThis deduction has been extended to include refurbishmentscarried out on properties other than the principal privateresidence, including property rented out by the taxpayer (aslong as such refurbishment does not form part of thetaxpayer’s economic activity).
Income Tax Deductions for Home RefurbishmentThe maximum deduction is limited to €20k over several yearsand to those refurbishments that improve accessibility,installations such as internet or digital television or those thatimprove energy efficiency and reduced water usage
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