Notice from the Tax Agency to the owners of a flat or a house about personal income tax

The Treasury warns any homeowner of the Fiscal obligations that they have in case they sell their property. As general rule there are three taxes which they will have to face, although there are exceptions that will allow some lucky ones to save them, at least in part.

The taxes we are referring to are: Personal Income Tax (IRPF), municipal capital gains and Real Estate Tax (IBI).

Typically, a sale involves a capital gain. This circumstance must be reflected in the Income Tax return and, consequently, be taxed.

The municipal capital gains come to tax the increase in value experienced by the property sold since its purchase.

Finally, it is up to the seller to pay the annual fee corresponding to Real Estate (IBI).

Exceptions

However, owners who sell an apartment or home will have the possibility of getting rid of the tax obligations set out above in some cases: for example,einvestment in habitual residenceby be over 65 years old when selling the habitual residence and for benefiting from a Settlement.

When the habitual residence is sold and the money obtained in that operation is used to buy a new habitual residence, the seller could be free from paying personal income tax. The reinvestment of the money must occur within a maximum of two years and all the money obtained from the previous sale must be invested in the new acquisition, since otherwise the difference between both amounts would be subject to personal income tax.

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On the other hand, those over 65 years of age who sell their primary home will not have to pay personal income tax, whether or not they reinvest the proceeds in a new property. Of course, if what they sell is not their primary home, but a second property, they must pay taxes on the sale unless the money obtained is used to create a life annuity, subject to a series of requirements.

Finally, when owners are forced to hand over their habitual residence in lieu of payment due to not being able to pay a mortgage loan, they will not have to pay personal income tax either.