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Income Tax

Published on April 16th 2019

How to deduct the expenses of your home?

Like every year, that date approaches for which many begin to prepare the draft for tax returns. The deadline to file tax returns for 2018 is just around the corner and, if you have a house owned or rented, you need to know how to report such situations.

If you rent your property to be used as a habitual residence

First of all, you should know that including the properties you have for rent is mandatory. Renting your flat or house with the aim of it being used as a regular residence for the tenants has a series of tax benefits on real estate capital income. Of course, provided that said property is rented as housing and not for other uses (i.e. commercial spaces).

In the event that the rental of your property is used for the habitual residence of a natural person, you would be exempt from paying VAT and you should not issue an invoice, but just receive your tenants.

There are many costs arising from renting your home that can be deducted on your tax return for 2018, such as the costs of maintenance and repairs that were needed for the property, the expenses of utilities like electricity or water – under the condition that they are paid by you, but if the tenant foots the bills, they can not be deducted-, or the expenses of administration, of surveillance or for concierge service, that is to say, of the building / community association. Other examples of deductions could be due to taxes (for instance ¨IBI¨), amortization expenses of movable assets (i.e. a washing machine, a refrigerator, etc.,) or the amortization of the property itself.

And if I rent a room inside my home?

Another case would be that, inside your usual home, you rent a room that you did not use. In this instance, you should report the amount you enter for the rent of the room as a return on real estate, and if the house is the usual residence and you have the right to deduct for investment in a habitual residence you would deduct the proportional part used as a habitual residence, which is usually done based on square meters.

Acquisition of habitual residence

Although the deduction for investment in the habitual residence was abolished as of January 1, 2013, a set of transitional rules was established to continue practicing these deductions. For example, homeowners can still benefit from this deduction for those homes acquired before January 1, 2013 and for those taxpayers who had paid amounts before January 1, 2013 for renovation or expansion of the habitual residence, provided that the construction finished before January 1, 2017, and provided that the taxpayers have deducted for said home in 2012 or in previous years, unless they have not yet been able to make the deduction because the amount invested in it has not exceeded the amounts invested in the previous years.