Spanish Mortgage Tax Benefits
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Spanish Mortgage Tax Benefits

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Thursday, 23 Oct 2008

This information refers only to national laws. It does not discuss the specifications made under the laws passed by each autonomous community based on the powers transferred to them under Act 14/96, dated 20th December, on the Transfer of National Taxes to the Autonomous Communities and Complementary Measures.

Spanish Tax Breaks

The purchase, as well as the construction or restoration, of a home (provided it is or will be the primary residence) entails a series of tax benefits with regard to personal income tax:

Savings through a Home-Savings Account

Holders of this type of account are entitled to deduct(1) 15% of the increase in the balance of their Home-Savings Account from their taxable income, provided the amounts invested are used exclusively for the purchase or restoration of their first primary residence and the account is not more than 4 years old.

Payments made by the homebuyer

Homebuyers may deduct(1) 15% of the amounts paid for the purchase or restoration of a home that is or will be their primary residence.

Loan financing

When a bank loan is used to finance at least 50% of the cost of the purchase or restoration of a primary residence, and a total of no more than 40% of the loan is repaid in the first 3 years of its life, the following deductions apply:

The first 2 years (as of the purchase or restoration), 25% of the first €4,507.59 paid each year for principal, interest and financing costs may be deducted. This rate falls to 15% for the remainder of the amount paid up to a maximum of €9,015.18.
In subsequent years, the foregoing percentages are 20% and 15% respectively.
With homes purchased prior to 4th May 1998, the loan holder will be entitled to a larger personal income tax deduction, as per the conditions set out in the Spanish Budget Act.

The costs and taxes arising from the purchase of a primary residence are also tax-deductible.