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V1787-24 17 July 2024 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · rendimientos del capital inmobiliario

Improvement works increase acquisition value, whereas repairs are deductible expenses

The taxpayer asks whether renovation works on a property intended for rent constitute repair expenses or improvements. The DGT explains that repairs maintain the asset's utility and are deductible, whereas improvements or extensions increase its capacity or useful life and must be added to the acquisition value.

The question raised

Whether the payments made for all these concepts must be classified as repair and maintenance expenses or as improvements for the purposes of Personal Income Tax.

The DGT's ruling

Repairs and maintenance are those intended to maintain the useful life and capacity for use of the property. Improvements or expansions are those that increase capacity, habitability, or extend the useful life, being integrated into the acquisition value. Repair and maintenance expenses are deductible from the income from real estate capital, provided they do not exceed the total income for the period (with the possibility of offsetting the excess in the following four years). For expenses incurred prior to the rental to be deductible, they must be aimed exclusively at the future generation of income and not at the enjoyment of the owner.

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