How rent is taxed in the income tax return

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como tributa el alquiler en la declaracion de la renta

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If you have a rented home or an empty apartment that you want to rent, you will have many questions such as what the rights are and obligations of the landlord, how avoid delinquent tenants or how the rent of an apartment is taxed in the income tax return. In this post we tell you how to calculate what you must pay in personal income tax for the income you receive, what expenses you can deduct, what happens if you rent the apartment to a family member or if you do not declare the income they pay you. 


Obligation to declare the income you receive


The first thing you should know is that you are obliged to include the amount of income you receive in your personal income tax return, otherwise you will face sanctions from the Tax Agency, as as we will see in the last section of this post. 


The rental income you receive is considered real estate capital return and is integrated into the general tax base, which also includes concepts such as the salaries you receive for your work or the retirement pension. , for example. 


The obligation to declare rental income derives from the regulation of article 22.1 of the Personal Income Tax Law: 


They will be considered full income from the ownership of rural and urban real estate or real rights that fall on them, all those derived from the lease em> or the constitution or transfer of rights or powers of use or enjoyment over them, whatever their name or nature.



How is what must be declared calculated?


To know how the rental of an apartment is taxed in the personal income tax return, you must consider the following: 


– To make the calculation, the income actually received is considered, as well as the amounts assimilated to the income (real estate tax, community expenses, insurance, etc.). 


– Next, a series of expenses are deducted. In general, you can deduct any type of expense that is related to the rental of the home, especially the following: 


  1. Home repair expenses. It is possible to include the costs of painting the floor, repairing some installation or doors, for example. But, it is necessary that if, for example, you replace one window with another, the two windows are of the same quality, because otherwise it would be considered an improvement. 
  2. Taxes. The personal income tax law establishes in article 23.a) 1 that non-state taxes and surcharges may be deducted, as well as state fees and surcharges. Therefore, the Real Estate Tax (IBI), the garbage collection rate and other taxes may be deducted, as long as they are not passed on to the tenant.
  3. Amortization of the property housing. It is possible to subtract from the rent the amount you pay for the depreciation of the property, as long as it refers to effective depreciation. Article 23.1 B) establishes that in the case of real estate, amortization is considered to meet the effectiveness requirement if it does not exceed the result of applying 3% to the highest of the following values: the acquired acquisition cost paid or the cadastral value. , not including the value of the land.
  4. Doubtful balances. In the event that you have a tenant who does not pay you rent, you can deduct the money that you have not collected, but the debtor must be insolvent and more than six months must have passed since the collection attempt. 
  5. Contract formalization expenses. Other expenses that you can deduct are those related to the fees of real estate consultants who have been involved in the rental or legal expenses for drafting the contract.
  6. Other expenses . Community expenses, gardening expenses, administration expenses, as well as spills or insurance expenses will also be deductible. These expenses, obviously, will be deductible if you pay them, but not if you pass them on to the tenant. On the other hand, the same thing happens with supplies. 


In order to deduct all these expenses, it is important that you have them documented with invoices or tax receipts such as IBI. 


– With the previous calculations a net return is obtained to which a 60% reduction is applied if the rented property is a home


– Finally, all the amounts that form part of the tax base are added and a series of sections are applied, which are as follows: 


Income tax sections 2021Types to apply
From 0 to €12,450 &nbsp ;             19%          
From €12,450 to €20,200             24%
From €20,200 to €35,200             30%
From €35,200 to €60,000             37%
From €60,000 to €300,000             45%
More than €300,000             47%

However, for the calculation of personal income tax it must be considered that the rates are applied progressively and that the personal and family minimums must be considered. 


What happens if I rent the apartment to relatives?


It is quite common to rent a home to help a child or other family member. In this case, a special rule applies whereby the net yield cannot be less than 2% of the cadastral value (1.1% in the case of municipalities that have reviewed the cadastral value of the properties in the last ten years) . 


What happens if you change your home and rent the one you had for the first time?


It is quite common for a person to change house and not sell the previous one, but rather decide to rent it. In this case, some doubts may arise such as the following: 


– What tax address should be included in the personal income tax return? You must consider your address as of December 31 of the previous year. 


– Will you be able to continue deducting the purchase? If you were entitled to this tax relief, you will continue to have it, but only for the time in which the home was your habitual residence. 


What can happen if I do not declare the rental income?


It may happen that due to an error or poor advice you do not declare the rental income you receive. In this case, if the Tax Agency verifies that you have not declared the lease, it will send you a notification in which it will make a settlement proposal. This is what is called a parallel statement. If this happens, you will not be able to apply the 60% tax reduction. 


In addition, depending on the severity of the tax violation, which can be minor, serious or very serious,you may be fined between 50% and 150% of the amount not declared. strong> The grading of the penalty will also depend on the concealment of the income or whether or not fraudulent means have been used. 


In relation to this topic, it is important to know that the Tax Agency can find out that you have rented the home through various means such as electricity or water supplies, for example, data from the real estate registry or the income tax return. of the tenant. 


In short, it is not only important to know how the rental of an apartment is taxed in personal income tax, but also how to optimize what you are going to pay by applying the deductions or reductions regulated by law and avoiding hiding the rent to the Treasury. 

Ana Vila

Ana Vila

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