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

When transferring a home, whether it is a primary or secondary residence, the calculation of capital gains or losses in Personal Income Tax (IRPF) depends directly on the correctly determined acquisition value. A recurring doubt among taxpayers is whether all expenses incurred on the property can be added to said value to minimize the tax impact of the sale.

What the DGT has resolved

The Directorate General of Taxes (DGT) has clarified the distinction between the concepts that make up the acquisition value according to IRPF regulations. The acquisition value includes the actual purchase price, investments and improvements, as well as the expenses and taxes inherent to the acquisition.

However, the criteria establish a clear boundary: repair and maintenance works, whose objective is to maintain the useful life and normal use of the property, do not constitute an increase in the acquisition value. In contrast, interventions that increase capacity, habitability, or extend the useful life of the property are considered improvements or extensions, and these are the only ones that can be integrated into the acquisition cost.

What it means for you

If you have carried out works on your property before selling it, you must correctly classify each invoice. If the works were merely to maintain the home in usable condition (such as painting, fixing a pipe, or repairing a roof), you will not be able to include them to increase the acquisition value. This implies that the resulting capital gain could be higher than expected if the nature of the work is not correctly distinguished.

Conversely, if the works have resulted in an improvement to the structure, an extension of square footage, or an increase in habitability, these amounts can indeed be computed to reduce the taxable base of the capital gain.

What is advisable to do

It is fundamental to maintain exhaustive documentation of all interventions carried out on the property. For an investment to be admitted as an improvement, it must be possible to prove that it has provided added value or greater capacity to the asset. It is recommended to analyze the technical nature of each invoice and contrast it with current regulations to ensure that the calculation of the capital gain is accurate and complies with the requirements of the IRPF Law.