Practical case

The marriage composed by Mr. RJR and Mrs. MAT, resident in Barcelona, has rented three homes of her property in 2024 under the conditions set out below. The relationship between income, expenses and other data of interest for determining net income are those indicated in each of the assumptions.

The reduced net capital gains from these homes in 2024 are requested, in the case of joint taxation.

1. Rented housing in a non-stressed area.

The property was rented from January 1, 2021, until May 31, 2024, when the tenants left, for a monthly rent of 900 euros. On June 1, 2024, he signed a new contract agreeing to a monthly rent of 1,000 euros.

The house was purchased in 2000 for an amount equivalent to 120,000 euros plus 9,000 euros in expenses. To purchase the property, they applied for a mortgage loan from Bank "Z," for which they paid €400 in interest and €2,200 in principal throughout 2024. The cadastral value of said home, which was revised in 2012, amounts to €76,200, of which €37,080 corresponds to the land value and €39,120 to the construction value. According to the data, the property tax receipt for the 2024 fiscal year appears, with its cadastral reference number 5661402VK4757B0033LR.

The acquisition cost of the furniture that furnishes the home, according to the 2016 invoice, amounts to 8,500 euros. The expenses incurred in 2024 for said dwelling were the following:

Real Estate Tax (IBI): 320
Community: 900
Plastering of the facade: 500

Solution to the case of rented housing in a NON-stressed area :

Note:In accordance with the ninth Final Provision of Law 12/2023, of May 24, on the right to housing ( BOE of May 15), the new percentage reductions for the rental of properties intended for housing are applicable from January 1, 2024 for contracts signed after May 26, 2023.

Total income corresponding to the first contract (from January 1 to May 31, 2024) (900 x 5) 4,500

Total income corresponding to the new contract (from June 1 to December 31, 2024) (1,000 x 7) = 7,000

NOTE: To complete it in the Renta web program, you must register as many leases as contracts you have had on the same property during the fiscal year, entering the data corresponding to each one individually.

Total income: 4,500 + 7,000 = 11,500

Deductible expenses :

Interest on capital invested in the acquisition of housing (mortgage loan) ⁽¹⁾: 400
Repair and maintenance costs ⁽¹⁾: 500
Taxes, surcharges and fees (IBI): 320
Community fees: 900
Amortization:
- * Housing (3% x 66,228.60) ⁽²⁾ = 1,986.86
- * Furniture (10% off 8,500) ⁽³⁾ = 850

Total deductible expenses: 4,956.86

Net income (11,500 – 4,956.86) = 6,543.14

From January 1 to May 31, 2024: 4,500 - (4,956.86 x 5/12) = 2,434.64
From June 1 to December 31, 2024: 7,000 - (4,956.86 x 7/12) = 4,108.50

Reduction for housing rental:

Regarding the performance obtained under the first contract (prior to May 26, 2023): (60% x 2,434.64) = 1,460.78
Regarding the performance obtained as a result of the current contract: (50% x 4,108.50) = 2,054.25

Reduced net performance: (6,543.14 - 1,460.78 - 2,054.25) = 3,028.11

Note: as a consequence of the new thirty-eighth transitional provision of the Personal Income Tax Law, introduced by Law 12/2023, of May 24, on the right to housing, the positive net income from real estate capital derived from housing rental contracts that had been entered into prior to May 26 2023 , will be subject to the reduction provided for in section 2 of article 23 of this law in its wording in force on December 31, 2021, therefore, in the case raised, 60% corresponds to the part of the income obtained as a result of the contract entered into in 2021, until May 31, 2024.

The 50% percentage is applicable to the performance obtained after the contract was signed on June 1, 2024, that is, after May 26, 2023, as it does not meet the requirements for the application of the increased reduction percentages .

Had the previous contract (the one signed before May 26, 2023) remained in force, the applicable percentage on the positive net income would have been 60% throughout the 2024 tax period (wording in force as of December 31, 2021).

Notes to the solution of rented housing in a NON-stressed area :

⁽¹⁾ The total amount to be deducted for interest on external capital invested in the acquisition of the property and the costs of repair and maintenance of the property will be limited to the amount of the gross income obtained. The excess may be deducted in the following four years (article 23.a).1 of the Tax Law. In this case, the total amount (400 + 500 = 900 euros) is much lower than the total income (11,500 euros). ^{(Return interests)} ^{(Return repair costs)}

⁽²⁾ To determine the amounts allocated to the amortization of the property, the following data is taken into account:

Cadastral value: 76,200 euros
Cadastral value of construction: 39,120 euros
% cadastral value of construction/cadastral value [39,120 ÷ 76,200) x 100] = 51.34%
Acquisition cost (including expenses associated with the purchase) (120,000 + 9,000) = 129,000 euros
Acquisition cost, excluding land value (129,000 x 51.34%) = 66,228.60 euros

According to article 14.2.a) of the Personal Income Tax Regulations, the amortization may not exceed, in each year, the result of applying 3% to the highest of the following values: cadastral value of construction (39,120 euros) or acquisition cost, excluding land (66,228.60 euros). ^(Back)

⁽³⁾ According to article 14.2.b) of the Personal Income Tax Regulations, the amortization may not exceed, in each year, the result of applying to the acquisition costs paid for the acquisition of the furniture (transferred together with the home) the amortization coefficients determined in accordance with the simplified amortization table approved by Order of March 27, 1998, referred to in article 30.1.ª of the aforementioned Regulation, that is, 10%. ^(Back)

2. Leased housing in stressed area

The property, located in Granollers (Barcelona), has been rented since April 1, 2024, for 650 euros per month.

It was acquired in 2003 for an amount equivalent to 70,000 euros, plus 3,000 euros in expenses. To purchase the property, they applied for a mortgage loan from Bank "Z," for which they paid €200 in interest and €1,200 in principal throughout 2024. The cadastral value of said home, which was revised in 2011, amounts to €46,200, of which €17,080 corresponds to the land value and €29,120 to the construction value, according to the data appearing on the 2024 property tax receipt, with cadastral reference number 4927802TG3442F0088ZR.

The acquisition cost of the furniture installed in the home, according to the 2017 invoice, amounts to 6,900 euros. The expenses incurred in 2024 for said dwelling were as follows:

Real Estate Tax (IBI): 260
Community: 850
Plastering of the facade: 210

This property was rented for the previous three years until December 31, 2023, for a monthly rent of €700 (therefore, it was available to its owners from January to March 2024). Mr. RJR and Mrs. MAT, aware of the new tax incentives for leasing residential properties, have taken advantage of the formalization of the new contract to reduce the monthly rent for the new tenant to 650 euros per month, in order to take advantage of the application of a higher reduction percentage.

Solution to the case of rented housing in a stressed area :

Total income (650 x 9) = 5,850

Deductible expenses :

Interest on capital invested in the acquisition of housing (mortgage loan) ⁽¹⁾ : 200 x 9/12 = 150
Repair and maintenance costs ⁽¹⁾: Repair and maintenance costs: 210 x 9/12 = 157.50
Taxes, surcharges and fees (IBI): 260 x 9/12 = 195
Community fees: 850 x 9/12 = 637.50
Amortization:

* Housing (3% x 45,990) x 9/12 ⁽²⁾ = 1,034.78

* Furniture [(10% off 6,900] x 9/12 ⁽³⁾ = 388.13

Total deductible expenses: 2,562.91

Net income (5,850 - 2,562.91) = 3,287.09

Reduction for housing lease ( 90% / 3,287.09) = 2,958.38

Reduced net yield: ( 3,287.09 - 2,958.38) = 328.71

Notes on the solution for rented housing in a stressed area :

⁽¹⁾ The total amount to be deducted for interest on external capital invested in the acquisition of the property and the costs of repair and maintenance of the property will be limited to the amount of the gross income obtained. The excess may be deducted in the following four years (article 23.a).1 of the Tax Law. In this case, the total amount (200 + 210 = 410 euros) is much lower than the total income (5,850 euros). ^{(Return interests)} ^{(Return repair costs)}

⁽²⁾ To determine the amounts allocated to the amortization of the property, the following data is taken into account:

Cadastral value: 46,200 euros
Cadastral value of construction: 29,120 euros
% cadastral value of construction/cadastral value [29,120 ÷ 46,200) x 100] = 63%
Acquisition cost (including expenses associated with the purchase) (70,000 + 3,000) = 73,000 euros
Acquisition cost, excluding land value (73,000 x 63%) = 45,990 euros

According to article 14.2.a) of the Personal Income Tax Regulations, the amortization may not exceed, in each year, the result of applying 3% to the highest of the following values: cadastral value of construction (29,120 euros) or acquisition cost, excluding land (45,990 euros). ^(Back)

For the months of January, February and March that were not rented the imputed real estate income must be declared. In this case, since the cadastral value has not been revised:

2% (46,200 euros x (90/366) = 227.21

NOTE: The deductibility of these expenses only applies to the part of the tax period in which they are rented. Consequently, expenses generated during the time in which the property is not rented are not considered deductible expenses for the purposes of 23.1 of the Income Tax Law, even if it is available for renting (in expectation of renting). Interpretative criterion established by the Supreme Court in Judgment No. 270/2021, of February 25 (ROJ: STS 910/2021).

Note: Please note that Granollers is among the areas with a stressed residential market that have been declared in accordance with the procedure provided for in article 18 of Law 12/2023, of May 24, on the right to housing as a result of the Resolution of March 14, 2024, of the Secretary of State for Housing and Urban Agenda ( BOE of March 15), with a period of validity between March 16, 2024 and March 16, 2027. As a result of the above, and having met the requirement of reducing the rent by more than 5% compared to the last rent of the previous contract once the annual update has been applied, they are entitled to apply the 90% reduction percentage.

3. Housing rented to a family member.

The house was acquired in 2009 for 45,000 euros, including the expenses inherent to said acquisition, and has been rented since 2020 to a brother of Mrs. MAT. for 300 euros per month.

The cadastral value of the property is 13,800 euros, of which 4,830 euros correspond to the value of the land and 8,970 euros to the value of the construction. This cadastral value was last revised in 2011. The cadastral reference of said property is 4927802TG3442F0134YK.

The expenses of this home throughout 2024 have been as follows:

Real Estate Tax (IBI): 91
Loan interest: 4.200
Capital amortization: 1.202
Community: 720
Air conditioning installation (01-07-24): 1,500

Solution to the case of a home rented to a family member

The highest value of the following shall be computed as the minimum total net return:

3.1. The difference between gross income and deductible expenses.

Interest on capital invested in the acquisition of housing (mortgage loan) ⁽¹⁾ : 3.600

* Limit: gross income: 3.600 euros

* Amount from 2024 pending deduction in the following 4 years: 4,200 -3,600 = 600
Taxes, surcharges and fees (IBI): 91
Community fees: 720
Amortization:

* Housing (3% x 29,250) ⁽²⁾ = 877.50

* Air conditioning [6/12 x (10% s/1,500] ⁽³⁾ = 75

Total deductible expenses: 5.363,50

Net return (3,600 – 5,363.50) = -1,763.50

Reduction for housing rental ⁽⁴⁾ : 0

Reduced net performance: -1,763.50

3.2. 2% of the cadastral value (2% x 13,800) = 276

Net performance:

The highest value of the two calculated in letters a) and b) will be declared. That is, 276.

Notes to the solution of the house rented to a relative :

⁽²⁾ To determine the amounts allocated to the amortization of the property, the following data is taken into account:

Cadastral value: 13,800 euros
Cadastral value of construction: 8,970 euros
% cadastral value of construction/cadastral value [8,970 ÷ 13,800) x 100] = 65%

Acquisition cost, excluding land value (45,000 x 65%) = 29,250 euros ^(Back)

⁽⁴⁾ The reduction for leasing properties used for housing does not apply because the net yield is negative. However, please note that, if the net income were positive, in accordance with the new percentage reductions for residential rentals in Article 23.2 of the Personal Income Tax Law applicable from 2024, you would be entitled to a 60% reduction since this was a rental contract signed in 2020. ^(Back)

3. Sum of reduced net returns on real estate capital

The sum of the reduced net capital gains from the three leases: (3,440.61 + 315.80 + 276) = 4,032.41