Almost all transactions are taxed and it is difficult to escape from the control of the treasury. However, sometimes there are taxpayers who are exempt from paying taxes. In the case of the sale of a home, the capital gains obtained may be exempt when the money is reinvested in the purchase of another habitual residence or in its rehabilitation. Of course, almost nobody today is free of payment of municipal capital gains, except if you sold in losses.
In particular, when a person sells his / her habitual residence, that gain will not have to be declared in the IRPF if he / she has reinvested the amount obtained in the purchase of another habitual house or in the rehabilitation of the house that will be his / her home. In this way, taxes that range from 19% to 23% of the profit obtained are saved.
The profits obtained must be integrated into the tax base of savings and will be taxed at the fixed rate of 19% up to 6,000 euros, 21% (from 6,000 to 50,000 euros) and 23% (from 50,000 euros onwards).
In case the taxpayer has signed a mortgage to buy a new house, then the value of the sale minus the principal of the loan pending amortization will be considered as the total amount obtained in the transfer.
Another group of taxpayers exempt from paying income tax on the sale of their home are those over 65 years of age. If they sold a property last year, they may qualify for some tax benefits depending on the type of property and the percentage of ownership they have. If the dwelling is habitual, the exemption is 100% and if the ownership is shared, the exemption will only be applicable to the owner over 65 years of age with respect to the part of the house that belongs to him.
If the home sold is not the usual one, those over 65 may not pay taxes for the gain obtained if it is reinvested in a life annuity. The maximum amount that can be allocated to the annuity is 240,000 euros and the reinvestment must be made within six months.
Another group that is exempt from paying IRPF for the sale of their habitual residence is that of people in a situation of severe dependency or of great dependence in accordance with the Law of Promotion of Personal Autonomy and Care for Persons in a Situation of Dependence.
What happens if you want to buy a new construction home?
The Central Economic-Administrative Tribunal (TEAC) establishes a period of two years to complete the works and acquire the new property. That is, two years after the transmission of the house or two years before said sale. In the latter case, for the sale to be exempt from taxation, it would be necessary to request a mortgage on the home and later cancel it after the sale of the old house without exceeding the established period of two years.
The tricks of the Treasury to force pay IRPF
The law firm Attico Jurídico states that the Treasury usually scrutinizes taxpayers who have applied the exemption for reinvestment, so it is advisable to be very attentive to the different problems that may arise when enjoying the exemption:
1. Forget to mention in the declaration that the amount obtained in the sale of the home has been reinvested: In this case, the Treasury considers that the exemption for reinvestment is a tax option. Therefore, if, when declaring the gain obtained, it is not mentioned that the amount has been reinvested, the Treasury will consider that the taxpayer has chosen not to apply the exemption. And this option can no longer be modified once the tax declaration period ends (July 2 for the 2017 IRPF). The worst thing is that some Courts of Justice follow this criterion of the Treasury.
2. Not to reinvest exactly the amount obtained in the sale: As the Law requires that the reinvestment must be of the amount obtained in the sale, the Treasury considered that if this had not been the case (for example if a new house was bought before selling the above), the exemption did not apply. It is a criterion, however, declared illegal by the TEAC itself, in a resolution issued in 2014.
3. How long can the Treasury check ?: Lastly, the Treasury considers that the statute of limitations in these cases is counted from 2 years after the sale of the previous habitual residence (maximum period to reinvest). And this, even if the taxpayer does not exhaust that term and has bought the new home much earlier. Faced with this criterion, there are judicial pronouncements, for example from the Supreme Court of Madrid, which consider that the statute of limitations begins when the taxpayer, once the previous house is sold, buys a new one.
What happens if I have sold the house at a loss
If you have lost money with the sale of a house, you should not pay for this negative return, but you must include it in the IRPF declaration. In addition, the losses can be compensated with the capital gains obtained in the year, thanks to funds, stocks or other real estate. The result is a reduction in the fiscal invoice.
But if even then the result is negative, then it will be compensated with the positive balance of the returns of the movable capital included in the taxable base of the saving of the own exercise, with the limit of 20% of said balance.
If after this compensation there is still a negative balance, it will be compensated in the following four years in the same order as we have indicated.
Municipal capital gain remains to be paid
Any person who sells with profits will have to pay this municipal tax, unless it sells at a loss, as established by the Constitutional Court in May 2017. Currently the modification of the tax has not yet been approved. The maximum coefficients that municipalities can apply later will also be changed.
The Supreme Court has made it clear that it will only be possible to get rid of paying the tax in cases where it has been sold in losses. In a judgment issued in July 2018, he declared that the articles that regulate the tax are only unconstitutional when they record transmissions in losses, but not when there has been a gain in the transfer.
Of course, if the profit obtained is so small that the tax that goes to pay absorbs a large part or the whole of said profit, the tax could be unconstitutional due to confiscation. This issue has already been raised before the Constitutional Court and will be resolved shortly.