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V1698-19 9 July 2019 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · rendimientos íntegros

Interest on a rented property can only be deducted from the income of that same property

The taxpayer asks whether interest on financing for a property intended for sale can be deducted from rental income from other properties. The Directorate General for Taxes (DGT) rules that financing expenses are only deductible against the income of the specific property for which the debt was incurred.

The question raised

Whether such interest may be considered as deductible expenses from the gross income of other properties that are likewise leased.

The DGT's ruling

Interest on third-party capital invested in the acquisition or improvement of a leased property may only be deducted from the gross income of that same property. The amount of these expenses, together with repair and maintenance costs, may not exceed the amount of the gross income obtained from said property. If there is an excess, it may be deducted in the following four tax years, respecting the limit of the gross income of each year for that specific property. It is not possible to deduct these expenses from the income of other properties owned by the taxpayer.

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