Repsol YPF

The application of the 2007 Tax Reform has reduced tax relief for properties purchased with borrowed funds (the most common form of buying  a property, using mortgages). The new law establishes a single tax relief percentage of 15%, on 9015 euros per year. In 2006, this percentage was increased for the first two years after the property purchase, but this increase in the deduction percentage has now disappeared and the same relief is established for all years. 

This measure only affects properties purchased after 19 January 2006; for properties bought prior to this date, the deductions detailed in the law prior to the 2007 Tax Reform apply. If you purchased your property without borrowed funds, the deductions are the same as in 2006, in other words 15%, with a limit of 9015 euros per year. Deductions for property purchases are maintained in the event that you are in the process of separating or divorcing your partner, so long as the couple’s children and the parent they live with continue to reside in the property. The 2007 Tax Reform also establishes 20% tax relief on work to adapt the primary residence to make it suitable for the disabled. 

Property savings account
  
If you have a property savings account, on your 2007 Income Tax Return you can deduct 15% of the amount deposited, up to an annual limit of 9015.18 euros per tax return, in other words, the maximum deduction is 1352.28 euros per financial year. The 2007 Tax Reform establishes these limits per year and taxpayer, such that if you submit a joint tax return with your spouse or partner, your maximum tax benefit for this item will be 1352.28 euros. 

If you have a joint property savings account, but only one of you pays money into it, the deductions will be applied to 50% of the amount paid in. In this event, it makes more sense, from a tax point of view to look at the possibility of opening two separate accounts. 

Tax benefits for landlords that rent property to young people

The 2007 Tax Reform sets out tax benefits for landlords who rent property to young people (between the ages of 18 and 35), whose income is above the IPREM (Public Income Indicator of Multiple Effects). The IPREM is an income level indicator which is used to determine the amount for certain benefits or to access different public services and benefits, and for 2007 it is set at 5864.18 euros. 

Landlords will not need to pay tax on the income received for renting property to young people. However, these benefits are for property owners who rent their property and not for tenants. Tenants cannot claim tax relief on their rent, although it is worth finding out about the tax systems of the different autonomous regions, since some include specific provisions for young people.  

Second homes  

All deductions for property purchases refer to the primary residence, which is deemed to be that which constitutes your residence for a continuous period of at least three years (except for exceptional cases such as a legal separation, a job change…). The document establishing your primary residence is the electoral register, which features your residence as being the property specified. No tax relief is granted for purchasing a second home or for buying a parking space or any other premises that is not the primary residence.

Related articles

- Property valuations

- The Mortgage Act