Loss of the primary residence deduction following the donation of a spouse's share

The Dirección General de Tributos (DGT) has issued a relevant ruling regarding the application of the primary residence investment deduction in Personal Income Tax (IRPF) when a donation of part of the property occurs between spouses. This scenario is common in marriages under the regime of separation of assets who decide to modify the ownership of their residence.

What the DGT has ruled

The query analyzed whether a spouse who donates their share of the home could maintain the right to the primary residence investment deduction, arguing that the property remains their residence and that they continue to pay their share of the mortgage loan. The DGT has responded in the negative.

The ruling establishes that the donor spouse ceases to meet the indispensable requirement of property acquisition. By no longer being the owner of that part of the property, they lose the ability to continue claiming the deduction. On the other hand, the donee spouse receives different treatment: they may continue to deduct the part of the home acquired prior to 2013 under the transitional regime, but they cannot deduct the amounts corresponding to the new part acquired through the donation, given that the loan for said part will continue to be paid by the other spouse.

What this means for you

If you are an owner of a part of your primary residence and are considering donating your ownership share to your spouse, you must consider the tax implications in your income tax return. The loss of owner status implies the automatic loss of the right to the primary residence investment deduction for the transferred portion. This impact directly affects individuals operating under the regime of separation of assets who seek to modify the ownership structure of their residence.

What should be done

Before formalizing any transfer of ownership between spouses, it is necessary to evaluate the financial impact that the loss of the IRPF deduction will have. Every family situation and mortgage debt ownership status is different, so it is recommended to assess the tax consequences of the operation individually to determine if the transfer is convenient in global terms.