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V0591-22 21 March 2022 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · deducción por inversión en vivienda habitual

Right to tax deduction for main residence investment maintained after mortgage subrogation or replacement

A taxpayer inquired whether they could continue to deduct mortgage payments after replacing their current mortgage with a new one (including an increase in the principal amount to cover renovations and expenses). The Directorate General for Taxes (DGT) ruled that modifying financing conditions does not exhaust the right to the deduction, provided all legal requirements are met.

The question raised

Whether, after performing the restructuring operation through subrogation or cancellation and new contracting, due to the resulting form of indebtedness, the taxpayer will retain the same right to deduct the amounts they amortize or satisfy, in the proportional part corresponding to the original acquisition cost plus the expenses related solely to the change in financing.

The DGT's ruling

The novation, subrogation, or substitution of a loan, even with an increase in amount, does not conclude the financing process nor exhaust the deduction. The installments of the new loan entitle the taxpayer to a deduction in the proportional part attributable to the amortization of the original loan intended for the dwelling. The proportional part of the annuities corresponding to the increase in principal intended for purposes other than acquisition, such as renovations or improvements, shall not be deductible. If the cancellation and the new financing occur without a connection between them, the right to the deduction for the new operation would be lost.

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