Buying a home is one of the most significant moments in anyone’s life. But the excitement of having a new home brings with it the responsibility of fulfilling your tax obligations. In this guide we explain how to report the purchase of a home in your tax return and also cover other related issues that you may find very useful.

Declaring the purchase of a home

When you buy a residential property, you have an obligation to report the purchase to the Tax Agency. The way you do this will depend on whether the property you’ve bought is your primary residence or a second home.

What documents do you need?

To start with, make sure you have all the necessary documents:

– Deed of sale: This is the main document certifying the acquisition of the property.

– Transfer tax (ITP) receipt: For second-hand homes.

– VAT invoice: For new homes.

– Certificate of residence: If the property is your primary residence.

– Proof of payments: Including down payments and mortgage instalments.

What are the steps to be taken?

1. Access your draft tax return: You can access and, if necessary, modify your draft tax return via the Tax Agency (AEAT) portal.
2. Section on capital gains and losses: This is where you declare the purchase of the home.
3. Enter details of the property: Add the relevant information, such as the purchase price, acquisition date and property address.

Declaring a second home

If you’ve bought a second home, you must also declare it, though the tax implications will vary.

Use of the second home

– For personal use: If the second home generates no income, all you need to declare is the cadastral value, and then pay Personal Income Tax (IRPF) on imputed rental income.

– For rental: If you rent out the second home, you must declare the rental income. Certain related expenses, such as maintenance and repairs, are deductible.

What are the steps to be taken?

– Cadastral value: Find the property’s cadastral value on the Property Tax (IBI) receipt.

– Rental income: If rented, declare the gross rental income in the property income section of the return.

Declaring the mortgage on your tax return

The mortgage is a crucial consideration when buying a home. Depending on when you purchased the property and your personal circumstances, you may be eligible for certain tax deductions.

Deduction for purchase of primary residence

For homes acquired before 1 January 2013, you can deduct a percentage of the mortgage payments made during the year, including both principal and interest.

What are the steps to be taken?

1. Review the Requirements: Check whether your mortgage meets the criteria for the deduction.
2. Enter Mortgage Details: In the relevant section of your tax return, add the details of the mortgage, including principal and interest payments made.

Deduction for investment in primary residence

Homes acquired before 2013

If you bought your primary residence before 1 January 2013, you are entitled to deduct 15% of any amounts invested, up to a maximum of 9,040 euros per taxpayer.

What are the steps to be taken?

1. Go to the deductions section: In the Tax Agency’s program, go to the section on deductions for investment in primary residence.
2. Enter the amounts: Add the amounts paid, including both principal and interest.

Declaring the purchase of a home can seem complicated, but with the right documentation and following the correct steps, you can fulfil your tax obligations without any issues. Remember to review all the information and, if necessary, consult a tax advisor to ensure you take advantage of all the deductions and benefits you are entitled to.

If you’re thinking of buying a home, Testa is a great place to do it. Let us give you a hand in this exciting adventure!