12/04/19

2019 Annual income tax returns for rental housing owners

The 2018-2019 income tax return campaign has started off and taxpayers have, since April 2nd, three months to file their statements to the Agencia Tributaria (Spanish Internal Revenue Service) through the Agency’s website and its mobile app. Also, from May 14th, they can file their income tax statement in person with a prior appointment.

Although this is process that is repeated every year and taxpayers have the draft prepared by the Tax Agency, the income tax statement generates many doubts when checking the tax data and the deductions and reductions that should be taken into account. Does the rental property owner have the obligation to file the income obtained? What happens in cases of default by the tenant? What expenses can the owner deduct?

Let’s review the most important aspects to take into account in the income tax statement for a rental home owner:

INCOME TAX RETURN STATEMENT FOR LANDLORDS

The owners of rented properties have the obligation to file the returns obtained with their rents in the concept of “Returns of the real estate capital”. To calculate the return to be taxed, the income obtained must be subtracted from the deductible expenses and applied the relevant reductions. In the case of shared property, each co-owner must file based on their coefficient of participation in the property. If it happens to be a usufruct (right by which a person can use the property of another and reap their benefits) the usufructuary must be the one who files the income obtained by the rental of the property, leaving the owner free from a fiscal point of view.

IN CASE OF NON-PAYMENTS

The landlord has the obligation to file the rental income even if the tenant has not paid the rent. "However," explains Alex Vázquez, director of the Department of Rental Management of Forcadell-regulations allow deduction of non-income through the concept of Doubtful balance”.This deduction can be made in the event that one of these two assumptions is met:

  • That more than six months have elapsed between the first claim and December 31

  •  That the tenant declares himself in a situation of bankruptcy

Nevertheless, in cases where a claim for eviction for non-payment of rent has been filed, the six-month rule does not apply, since both the eviction and the end of the contract are carried out by court order, and are proof enough to consider the Doubtful balance.

DEDUCTIONS FROM RENT

The owner of a rental property can deduct all those expenses related to the home. "It is advisable," explains Alex Vázquez, "to gather all the information related to the property before submitting the income tax return and, above all, to have kept all the corresponding invoices." The owner can deduct the following expenses:

  • Community fees

  • Management expenses

  • Economic distribution costs

  • Mortgage interests

  • Interest and financing costs in the event that the owner has purchased furniture and household appliances in installments

  • Income property taxes (IBI, sanitation tax rate ...)

  • Conservation and repair expenses such as painting, arrangement of facilities, etc.

  • Home insurance and rent collection guarantee

  • Amortization of the property, accounting for 3% of the greater of the following values: value of acquisition of the property or value of the construction

  • Expenses caused by the formalization of the lease, sublease, assignment or constitution of rights and defense of a legal nature relative to the assets, rights or returns.

60% REDUCTION

Owners can apply a general reduction of 60% on the net return they have received from rent, which is the difference between rental income and deductible expenses. However, this reduction can only be applied by those owners who have formalized a rental agreement for a regular residence, not being applicable to seasonal or non-residential contracts.

"It is important not to confuse the deductions with the reductions," Alex Vázquez explains. “While both tax benefits reduce taxpayers' taxation, deductions are applied on the taxable amount and reductions on the tax base, on the net yield ".

 

 

Communication Contact

 
FORCADELL uses own and third party technical, personalization, analysis and advertising cookies, which process connection and / or device data, as well as browsing habits to facilitate browsing, analyze statistics on the use of the website.

;