DGT clarifies that mortgage debts cannot be deducted from the acquisition value

The calculation of capital gains or losses in Personal Income Tax (IRPF) requires a precise determination of the acquisition value of the asset. A recurring doubt arises when the acquired property carries previous encumbrances or debts, as occurs in auctions.

What the DGT has ruled

The Dirección General de Tributos (DGT) has clarified that the acquisition value must consist exclusively of the actual purchase amount, the cost of investments, improvements, and the expenses and taxes inherent to the process. In this sense, the criterion establishes that it is not possible to deduct the encumbrances and debts that burdened the property at the time of its acquisition to reduce said value.

The applicable regulation, Law 35/2006 on IRPF, determines that the interest on debts does not form part of the acquisition cost. Therefore, the fact that a property is acquired with an associated debt does not allow the taxpayer to use said encumbrance to decrease the acquisition value in the calculation of the difference between the transfer value and the acquisition value.

What this means for you

If you are an individual who has acquired a property, especially in auction processes where the asset may carry debts or mortgages, this criterion directly impacts your tax return. Since these encumbrances cannot be deducted, the acquisition value will be higher than some taxpayers might expect, which could result in a higher capital gain and, therefore, a higher tax burden at the time of selling the asset.

What you should do

It is fundamental to rigorously track all expenses and investments that can be capitalized as part of the acquisition value, such as inherent taxes and improvements. Since debts are not deductible, the correct documentation of the actual acquisition costs is the only way to ensure that the acquisition value is the maximum permitted by current regulations. It is recommended to assess each particular situation to determine the exact fiscal impact on your assets.