Limits on the deductible depreciation of leased real estate in Personal Income Tax

Determining the net yield of real estate capital requires a precise calculation of deductible depreciation. A binding ruling from the Directorate General of Taxes (DGT) has specified the parameters for applying this limit and avoiding errors in the Personal Income Tax (IRPF) return.

What the DGT has resolved

The DGT establishes that the depreciation that can be deducted cannot exceed 3% of the higher of two values: the acquisition cost paid or the cadastral value of the property. It is fundamental to note that, in both cases, the land value must always be excluded from the calculation.

In situations where the land value is unknown, the regulations allow it to be calculated by prorating the acquisition cost between the cadastral values of the land and the construction. On the other hand, for rights of use or enjoyment, depreciation is obtained by dividing the cost by the duration of the right, or by applying the 3% limit if it is a life interest.

What it means for you

If you are an individual receiving income from the leasing of a property, this criterion directly impacts your IRPF taxable base. An incorrect calculation of depreciation, whether by including the land value or by failing to apply the 3% limit to the correct value, can lead to an erroneous tax assessment.

This scenario is especially relevant for those taxpayers who own properties abroad and must declare such income in Spain, ensuring that the applied deduction complies with the requirements of the IRPF Law and its Regulations.

What you should do

It is necessary to verify the composition of the cadastral value of your properties to correctly identify the portion corresponding to the construction and exclude the land. Before filing your tax return, you must confirm whether the acquisition cost or the cadastral value (excluding land) is the higher value to apply the 3% percentage. Since each wealth situation presents particularities, it is recommended to assess your specific case to ensure compliance with current regulations.