Energy efficiency works require a primary residence or a rented property for the deduction

The application of deductions for energy efficiency improvement works in Personal Income Tax (IRPF) raises doubts regarding the required use of the property undergoing the renovation. Recently, the Directorate General of Taxes (DGT) has specified the housing use requirements to access this tax benefit.

What the DGT has ruled

The binding ruling establishes that, to apply the deduction provided for in the 50th additional provision of the IRPF Law, the works must be carried out in one of the following scenarios:

• Primary residence: The property must be the taxpayer's habitual residence.
• Rented property: The property must be another property owned by the taxpayer that is already leased for use as a residence.
• Intended for rent: The property may be a property that is not currently leased, provided it is destined for rent before December 31, 2027.

If the property does not meet the requirement of being a primary residence or is not in a situation of lease or intended for rent, the application of the deduction is not applicable.

What this means for you

If you are an owner and carry out energy efficiency improvements on a second home, on a vacant property that will not be intended for rent, or on a property provided free of charge to a family member (such as a spouse), you will not be able to apply the tax deduction. The regulations require a specific use that guarantees the social function of the housing or its economic exploitation through leasing. The mere free provision of a property for use as a primary residence by a third party does not meet the requirements of the 50th additional provision of the IRPF Law.

What you should do

Before starting energy improvement works with the intention of reducing the tax burden in your income tax return, it is necessary to verify the legal status and the intended use of the property. If the goal is to take advantage of the deduction on a property that is not your main residence, you must ensure that the property is leased or that there is a real intention to formalize a rental contract before the deadline established by the current regulations.