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V0320-18 8 February 2018 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · deducción por inversión en vivienda habitual

Life insurance premiums may be deductible if required as a condition of a mortgage loan

A taxpayer inquired whether life insurance premiums, required to avoid an increase in mortgage interest rates, can be included in the deduction for investment in the main residence. The Directorate General for Tax Affairs (DGT) ruled that this is possible if the insurance policy is among the conditions imposed by the lender.

The question raised

Possibility of including in the basis for the deduction for investment in the primary residence the premiums paid for the aforementioned life insurance, without the procurement of which the interest rate and consequently the cost of the loan financing the acquisition would increase.

The DGT's ruling

Life insurance premiums may form part of the basis for the deduction for investment in the primary residence, provided that their procurement is a condition imposed by the lender to maintain the terms of the loan. In the case of home insurance, only the portion covering mandatory risks shall be deductible, or the total amount if the lender requires additional coverage. The taxpayer must provide conclusive evidence that the procurement of the insurance is a condition of the loan.

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