If you are a homeowner and you are thinking of doing renovations, you have probably heard of the “deduction for investment in primary residence”.
However, you may not know what exactly this deduction is and how you can take advantage of it to reduce the cost of your comprehensive renovations. In this blog post, we explain everything you need to know about the deduction for investment in a primary residence.
What is the deduction for investment in a primary residence?
The deduction for investment in a primary residence is a tax relief that allows homeowners to reduce the amount of tax they must pay in personal income tax.
This deduction It applies to investments made in the main residence, such as renovations and improvements. To this end, Homes must meet certain criteria related to energy efficiency or accessibility for people with disabilities. If you’re thinking of buying a house to renovate, take a look at what the developer mortgage is. The tax deduction for investment in the main residence was eliminated for new purchases from 2013 onwards. Those who purchased their home before that date and are still paying the mortgage can continue to apply the deduction.
The deduction for investment in a home is usually applied to a percentage of the expenses in renovations. This percentage may vary depending on the legislation in force at any given time. For example, in some cases, 50% of renovation expenses can be deducted, while in other cases the deduction can be 30%. It is important to be aware of the legislation in force at all times, as it can change over time.
How to take advantage of the deduction for investment in a main residence?
To take advantage of this deduction, it is important that you meet certain requirements.
First of all, what we have previously mentioned is important, i.e. that the deduction for investment in a main residence was abolished in 2013, but it continues to apply unchanged for those taxpayers who bought before January 1, 2013. Of course, another necessary requirement is that the home in question is your main residence, that is, the place where you live permanently. In addition, it is necessary that the renovations or improvements made to the home are aimed at improving energy efficiency or adapting the home to the needs of people with disabilities or the elderly. Once the requirements have been met, the next step is to hire a professional to carry out the relevant reforms or improvements. It is important that the professional is a qualified professional and that they can issue invoices with detailed expenses. These invoices are essential to be able to claim the deduction for investment in a main residence. Additionally, it’s important to note that this tax relief only applies to home renovations or improvements, not to housing-related overhead expenses such as mortgage expenses or maintenance costs.
Deduction limits in the main residence according to the type of investment
If you are thinking of making investments in rehabilitation, construction or extension of your main residence, it is important that there are some limitations.
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- Investments in rehabilitation, construction or extension of the main residence: Up to a maximum of €9,040 per year in deduction, applicable jointly for all these concepts.
- Disability adaptation works: Up to €12,080 per year, and this limit is independent of the limit of €9,040.
It is important to note that the excess of the amounts invested over these amounts cannot be carried forward to future years
How to declare the deduction for investment in a primary residence in personal income tax
If you meet the necessary requirements for the deduction for investment in a primary residence, you must file a personal income tax return. Once the renovations or improvements have been made, it is necessary to include the expenses in the income tax return and wait to receive the corresponding refund.
In some cases, it is possible that the refund is made in the same year in which the renovations were carried out, while in other cases it may take longer.
Important considerations for the deduction for investment in a primary residence
It is essential to plan home renovations or improvements strategically to ensure that you do not exceed the limit mentioned above and do not miss the opportunity to obtain the corresponding tax deduction. In addition, it is important to note that the deduction for investment in a primary residence is not applicable to all improvements made to the home. For example, Renovations or improvements related to the decoration or aesthetics of the home are not eligible for this tax deduction.
Steps to take advantage of the deduction for investment in a primary residence
- Check the requirements: You can only benefit from this deduction if you bought your home before 2013 and it is your habitual residence.
- Hire qualified professionals: Refurbishment work must meet energy efficiency or accessibility requirements, and you’ll need itemized invoices and specific certificates to justify the deduction.
- Document all expenses: Keep all invoices and certifications, and declare the expenses in your personal income tax so that you can benefit from the deduction in the next tax period.
In short, this tax deduction is an excellent option to reduce the cost of home renovations, as long as the necessary requirements are met. To make the most of this tax deduction, remember that it is important to plan renovations or improvements strategically, hire qualified professionals, maintain good documentation and be aware of the legislation in force at all times.
At Kaleidoscope we can help you plan your comprehensive renovation! Contact us without obligation!
