Selling a flat can be a very important event in the life of any homeowner. However, it is an event that is often accompanied by a certain amount of concern, especially when thinking about taxes.
Usually, the sale of a property represents a considerable gain, although it is essential to understand the steps to declare this operation in the income tax, in order to prevent future problems with the Treasury.
Below, we will explain how to declare the sale of your home for personal income tax purposes and the essential aspects to consider in order to optimise tax payments. It is a simple procedure, as long as it is carried out with the correct information.
How to declare the sale of a property for income tax purposes
The sale of a flat must be included in the income tax return, as it is considered a capital gain. It is a gain that must be included in the ‘Capital Gains and Losses’ section of the Personal Income Tax.
Firstly, it is necessary to calculate the capital gain, which is done by subtracting the acquisition value (purchase price plus related expenses) from the transfer value (sale price).
Subsequently, deductible expenses must be applied, which involves adding to the acquisition value the additional basic expenses, such as the notary’s office, the registry or the renovations carried out on the property. Supporting invoices must also be considered.
It is also important to check for exemptions, as you may be exempt from paying tax on the gain if you are over 65 years of age or if you reinvest the profit in your primary residence.
Finally, it is important to present all the information in the income tax return, registering each operation in the ‘Capital Gains and Losses’ section of the Personal Income Tax. The Inland Revenue will be responsible for calculating the exact amount to be paid according to the corresponding values.
When to make the declaration for the sale of a property
The sale of a property must always be declared, whether it generates a capital gain, a loss or is neutral. The tax return in Spain is filed annually between the months of April and June, but the Inland Revenue establishes specific deadlines depending on the tax year. In the event that you have sold your flat in the previous year, the sale must be declared in the corresponding tax campaign, always respecting the official deadline. Any error in the declaration or omission of information could lead to penalties, so it is essential to carry out the processes within the stipulated time.
What tax should I pay when I sell my property: Taxes to be paid
The sale of a flat generates a capital gain that must be taxed for personal income tax purposes. This gain is added to the savings tax base and is taxed at a graduated rate, which varies between 19% and 28%. The exact proportion depends on the total amount of the gain:
- 19% for the first €6,000
- 21% for gains between €6,000 and €50,000
- 23% for gains between €50.000 and €200.000
- 28% for gains exceeding €200,000.
The percentages apply specifically to gains generated from the sale, but do not affect other income. Knowing the ranges can allow you to anticipate in advance exactly how much you will have to pay, with the aim of applying the correct deductions or exemptions to reduce the tax burden.
How much of the sale proceeds are left over?
To accurately calculate the profit on the sale of a flat, the purchase price plus deductible expenses must be subtracted from the sale price. However, this process is best illustrated by a practical example:
- Sale price of a property: 200.000€.
- Purchase price of a property: 150.000€.
- Deductible expenses of the property (such as notary, renovations, commissions): 10.000€.
Capital gain: [Sale price – (Purchase price + Deductible expenses)].
Capital gain: 200.000€ – (150.000€ + 10.000€) = 40.000€.
Steps to follow in order to include the sale of assets
There are several steps to follow to include the sale of a flat in the tax return:
- Gather the necessary documentation: in addition to the documents related to the purchase and sale of the property, it is important to also keep those associated with the deed of purchase, invoices for deductible expenses or sales contracts.
- Calculate the capital gain: crucial to obtain an accurate figure.
- Access the draft tax return: by logging in to the Tax Agency’s electronic headquarters or through the Renta Web programme.
- Complete the ‘Capital gains and losses’ section: enter the specific data and values in the corresponding section.
- Review and confirm the return: a careful review is a guarantee of avoiding future problems with the Inland Revenue, so it is important not to make any mistakes.
- File the return: electronically or on paper, depending on your preference. Keeping the proof of filing may be useful in the future.
- Keep the documentation: it is recommended to keep all the documents and supporting documents related to the operation for at least four years, as a receipt in the event that the Tax Agency requires a verification procedure.
Exceptions and special cases when it comes to declaring the sale of your property
There are certain exceptions and special cases in which you may be exempt from declaring the sale of your property or from paying tax on the capital gain. The main reasons are as follows:
- Exemption for reinvestment in a primary residence: you may be exempt from paying tax on the gain obtained if you sell a primary residence and reinvest the gain in the purchase of another primary residence, although the reinvestment must be made within two years of the sale for it to be valid.
- People over 65 years of age: people over 65 years of age who sell their home are exempt from paying tax on the capital gain, which applies regardless of the amount obtained from the sale.
- Sale of property purchased before 1994: If you bought a property before 31 December 1994, the gain from a sale is calculated differently. In this case, you are only taxed on the part of the gain that exceeds 50% of the transfer value.
- Reinvestment of a social housing property: it is possible to benefit from a tax exemption if the profit obtained from the sale is reinvested in a social housing property.
- Sales below the purchase value: if the sale of a property is made at a lower price than the purchase price, there is no capital gain to declare and therefore it is not taxed either.
- Inheritance or donation situations: in this circumstance, the taxation rules usually vary. If the person who inherits the property proceeds to sell it, he or she can benefit from the conditions of the acquisition value of the deceased person, which has a decisive influence on the calculation of the capital gain.
Assessing each of these conditions is a significant aspect that can significantly influence the tax burden when selling a property. It is advisable to consult a tax advisor if you consider that you find yourself in any of these situations, in order to ensure that you meet all the requirements and can benefit from the exemptions. From 1mast, your trusted real estate agent in Fuengirola and the Costa del Sol, we help you to sell your property always getting the best return on the sale and facilitating the process at all times.
