Income tax returns 2021: how it affects housing

One of the most frequent doubts for the owners at the time of calculating their income tax returns is to know what effect it has on their home.

It is completely normal to have doubts such as: Can I deduct my mortgage? And if I have a rented apartment, should I declare it? What happens to capital gains and losses?

At KM2 Real Estate Services, we want to outline all the aspects that can affect you as an owner at the time of calculating your income tax returns so that you have all the information.

Everything you need to know as a landlord in 2021

The Income tax returns or Income statements refer to the IRPF settlement of the corresponding year, in this case, 2021. A way to regulate taxpayers’ withholdings over the 12 months.

There can be two cases, that you get a return or you have to pay. If the withholdings throughout the year have been higher than they should have been, the Treasury will be responsible for returning the difference to the taxpayer. On the other hand, if the taxpayer has paid fewer taxes, he must pay the Treasury the parts that’s missing.

1. Can I deduct the mortgage?

Only those owners whose habitual residence has been signed prior to January 1, 2013, may be deducted from the mortgage. In addition, all associated expenses, such as insurance, opening fees, mortgage expenses, etc., may be deducted.

On the other hand, owners with mortgages after the specified date will not be able to deduct them.

2. I have a leased apartment, how does it affect me?

In the case of having a leased property, all the income received must be indicated, since these are considered income from real estate capital.

Of course, on these occasions, owners will be able to deduct the deductible rental expenses. In other words, as indicated by the Tax Agency, “the performance is quantified by subtracting the deductible expenses from the income and applying certain reductions to this amount, where appropriate”.

Some of the expenses that are considered deductible are: interest, mortgage expenses, repairs carried out on the home, or the IBI.

3. Should capital gains be included?

Yes. All property sales must be included in the Income Statement, as indicated by the Treasury: “If you sell a property, you have to include a capital gain or loss in your income statement.” Capital losses are not taxed, but must be declared anyway.

There are certain cases in which the gain may be exempt from reporting. You can consult the exceptions on the Tax Agency Website.

4. I have improved the energy efficiency of my home, can I deduct the costs?

There are three temporary deductions that affect the amounts invested in rehabilitation works:

• Works to reduce the demand for heating and cooling.
• Works to improve the consumption of non-renewable primary energy.
• Energy rehabilitation works.

Find out about all the requisites, here.

5. Is the deduction for investment in primary residence still valid?

No. As indicated by the Treasury, “Since January 1, 2013, this deduction has been abolished, but if you have deducted before that date you can continue applying this deduction in your Income Tax return if you meet the established requirements.”

The deadline to file the 2021 Income Tax Return is June 30, 2022.