Main residence deduction: limits based on ownership and personal funds

The application of the deduction for investment in the main residence in cases of co-ownership between spouses has raised doubts about what percentage of the amortization each person can deduct. The Dirección General de Tributos (DGT) has clarified that the right to the deduction does not depend solely on the responsibility towards the loan, but on the relationship between the ownership of the home and the personal funds contributed.

What the DGT has resolved

The query concerned whether spouses should apply the deduction based on the distribution of loan installments or on their share of the property ownership. The DGT's criteria determine that each spouse is entitled to the deduction based on the amounts they satisfy with their personal funds to cover the undivided share they acquire.

A key point is the treatment of joint and several borrowers. If both spouses are responsible for the entirety of the debt, it is presumed that the installments are paid in equal parts. However, if there is different ownership, the deduction has a limit:

• If one spouse owns 40% of the home but pays 50% of the installment, they may only deduct the amount corresponding to their 40% ownership.
• The excess paid is not considered intended for the acquisition of their undivided share.
• For the spouse with 60% ownership to deduct that percentage, they must effectively take charge of 60% of the loan payments.

What it means for you

If you are an owner of a property in joint ownership with your spouse, you cannot apply the deduction arbitrarily based solely on the distribution of loan payments or on the joint and several liability towards the banking entity. The regulations require consistency between the actual ownership of the property and the destination of the funds used for its amortization.

What you should do

It is necessary to analyze the ownership structure and the origin of the funds used to pay the mortgage. In cases of unequal ownership, it must be verified that the percentage of the deduction applied in the Personal Income Tax (IRPF) return coincides with the undivided share of the property and with the proportion of the installment effectively satisfied by each of the owners.