'Second chance' for homebuyers to apply for income tax deduction

RESIDENTS in Spain who bought a new home before 2013 may still be able to offset the purchase against their annual tax return, if they have not done so already.

Until that year, buying a main residence in Spain gave the owner tax deductions, but the then Partido Popular (PP) government scrapped this benefit, at a time when taxes in general had sharply risen to aid a flagging economy.

Now, over a decade on, the Central Financial and Contentious Court (Tribunal Económico-Administrativo Central, or TEAC) has created new windows to enable some of those who missed out to backdate their claims.

Anyone who had already applied a tax deduction in their annual return (Declaración de la Renta) in 2012 or before in relation to a main residential property purchase, who had bought their home prior to January 1, 2013, or carried out renovation works on it before that date, would have benefited from the now-defunct reduction scheme.

But some did not apply at all – those who did not have any taxable income, meaning they did not make a declaration, and those who were not obliged to file a tax return and opted not to do so, would not have offset their home purchase.

The latter would include anyone whose income is below the taxable threshold, or whose earnings came from one single source – such as a full-time job or a single State allowance, like a pension – and was below a specific amount.

These homeowners can now apply to offset their purchase against their 2023 taxes – for which the annual declaration window is still open, until June 30 – or in their 2024 return.

This said, the TEAC does not allow a 'second opportunity' for anyone who, by choice, opted not to include their home purchase when making a tax declaration before 2013.

But those who failed to apply for a first residence purchase deduction by mistake – rather than consciously – may still be able to apply now.

These deductions do not apply to anyone who was not a tax resident in Spain at the time they bought their property.

Spain considers you to be a tax resident if you spend 183 or more days of the year living in the country.

Homeowners who believe they may be in one of the above situations should contact their legal and financial advisor – their gestor or asesor – who would normally file their annual tax returns.