Difference between improvements and repairs in the acquisition value of a home

When selling a property, the calculation of capital gains or losses is a determining factor in the Personal Income Tax (IRPF) declaration. One of the most frequent doubts lies in whether the costs derived from works carried out during ownership can be added to the acquisition value to reduce the taxable base of the gain obtained.

What the DGT has resolved

The Dirección General de Tributos (DGT) has clarified the distinction between the concepts that can be included in the acquisition value and those that cannot. According to the established criteria, the acquisition value includes the cost of investments and improvements made to the acquired assets. Works that increase the capacity, habitability, or useful life of the property are considered improvements or extensions.

In contrast, expenses exclusively intended for repair and conservation, whose objective is to maintain the useful life or the current capacity of use of the property, do not form part of the acquisition value. For these investments to be admitted, the taxpayer must justify the nature of the works through invoices and other reliable means of proof.

What it means for you

If you are a homeowner and are planning a sale, it is fundamental to distinguish the nature of each expenditure made on the property. If the works have increased the value or utility of the property (such as an extension of square meters or a structural improvement), you may include them in the acquisition value, which will result in a lower capital gain and, therefore, a lower tax burden.

Conversely, if the expenses correspond to ordinary maintenance or repairs to preserve the current state, you will not be able to use them for this purpose. This nuance is especially relevant for foreign residents selling assets in Spain, as they must correctly classify these concepts in their tax return.

What you should do

It is necessary to maintain a rigorous record of all interventions carried out on the home. The documentation must consist of invoices that clearly detail the concept of the work to be able to prove to the Administration whether it is an improvement or a simple repair. The correct classification of these expenses is key to the accurate calculation of capital gains.