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V1793-24 17 July 2024 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · valor de adquisición

Improvement or expansion works increase acquisition value, whereas repairs are deductible

The taxpayer asks how to treat expenses incurred on a donated property to determine its acquisition value and their deductibility for rental purposes. The DGT clarifies that improvements and expansions increase the acquisition value, while repair and maintenance expenses are deductible as income from real estate capital.

The question raised

A request to determine the acquisition value of the property for the purposes of Personal Income Tax and the treatment that should be applied to the aforementioned expenses that do not constitute an increase in acquisition value in the event of leasing the property.

The DGT's ruling

Works that increase the capacity, habitability, or useful life of the property are considered improvements or extensions and form part of the acquisition value. Repair and maintenance expenses, intended to maintain normal use, do not increase the acquisition value but are deductible in the determination of the net income from real estate capital. For repair expenses carried out prior to the rental to be deductible, they must be aimed exclusively at the future obtaining of income and not at the enjoyment of the owner. The deductibility of these expenses is limited to the amount of the gross income obtained, and any excess may be offset in the following four years.

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