Improvement works on inherited homes: how to increase their acquisition value
The calculation of capital gains or losses in the transfer of real estate is a critical aspect of the Personal Income Tax (IRPF) declaration. A determining factor in this calculation is the acquisition value, which can be increased by certain investments made after obtaining the asset.
What the DGT has ruled
The Dirección General de Tributos (DGT) has clarified the nature of the expenses that can be included in the acquisition value of a property. According to the established criteria, this value comprises the actual acquisition amount plus the investments and improvements made to the asset. The administration clearly distinguishes between two types of interventions:
- Improvements: These are works that increase the capacity, habitability, or useful life of the property. These investments are considered part of the acquisition value.
- Repairs and maintenance: Expenses intended exclusively to maintain the normal use of material assets are not considered improvements and, therefore, do not form part of the acquisition value.
This criterion is based on the Personal Income Tax regulations (Law 35/2006) and its Regulation (RD 439/2007).
What it means for you
If you have inherited a home and carry out interventions on it, it is fundamental to distinguish the purpose of such works. If the works aim to improve the conditions of the property or extend its utility, you may add them to the acquisition value. This has a direct impact on the taxable base, as a higher acquisition value reduces the difference between the sale price and the acquisition cost, thereby decreasing the capital gain subject to taxation.
What you should do
For these investments to be admitted by the Tax Administration, it is necessary to have documentation that proves the nature of the work. It is essential to keep all invoices and proofs of payment that demonstrate that the expenses incurred correspond to improvements and not to simple maintenance or routine conservation tasks. Each investment situation must be analyzed to determine its correct tax classification.
Frequently asked questions
- Can I include the cost of painting a house as an improvement?
- No, painting is usually considered a maintenance expense to maintain normal use, not an improvement that increases capacity or useful life.
- What documents do I need to justify an improvement?
- It is necessary to have legal invoices that detail the nature of the work performed and the amount paid.