Deductibility of repairs in properties awaiting rental

The Directorate General of Taxes (DGT) has issued a relevant criterion for property owners who carry out maintenance work between one lease agreement and the next. The ruling focuses on determining the tax treatment of repair and conservation expenses applicable to properties that are awaiting rental.

What the DGT has resolved

The body establishes that repair and conservation expenses are deductible as income from real estate capital, provided they are directed exclusively toward the future generation of income and not toward the owner's personal enjoyment. For this deductibility to be effective, certain technical parameters must be met:

• Deduction limit: The deductible amount cannot exceed the total income obtained during the tax year. If there is an excess, it may be applied in the following four years.
• Imputation of income: During periods when the property is not rented, the owner is obliged to impute the corresponding real estate income.
• Annual expenses: Those expenses of an annual nature may only be deducted proportionally to the number of days the property remains leased.

What it means for you

If you are an individual who rents out properties owned by you, you must be aware that the intention of the renovation or maintenance must be strictly linked to the leasing activity. It is not enough to carry out the repair; it is necessary to prove that the expense is intended to enable the future generation of income. Furthermore, the management of annual expenses requires a proportional calculation based on the rental calendar, which implies more rigorous control of documentation and periods of occupancy.

What you should do

It is fundamental to maintain clear accounting of the leasing periods and the expenses incurred. Since deductibility is conditioned on the exclusivity of the purpose of generating income, it is necessary to document that the repairs do not respond to a particular use by the owner. It is recommended to assess each particular situation to ensure that the application of the Law 35/2006 (IRPF Law) regulations correctly matches the reality of your property.