People over 65 may exempt the donation of bare ownership of their home from Personal Income Tax
The transfer of real estate usually involves a capital gain or loss that must be taxed under Personal Income Tax (IRPF). However, regulations provide for specific exemption scenarios to protect the assets of certain groups, one of which has been recently clarified by the tax administration.
What the DGT has ruled
The Dirección General de Tributos (DGT) has determined that the donation of the bare ownership of a property does indeed generate a capital gain or loss. Nevertheless, the ruling establishes that if the property constitutes the donor's primary residence and they are over 65 years old, the resulting capital gain will be exempt from taxation.
For this exemption to be applicable, the residency requirements established by the regulations must be met: the taxpayer must have resided in the home for at least three years, or have done so in the two years immediately preceding the transfer. The DGT clarifies that this exemption applies whether full ownership is transferred or only the bare ownership is transferred.
What this means for you
If you are an individual over 65 and are considering transferring the bare ownership of your primary residence while retaining life usufruct, this ruling confirms that you will not have to pay tax on the capital gain derived from said operation. This represents a significant tax advantage when organizing succession or personal assets.
It is essential to verify that the home strictly meets the condition of a primary residence according to the residency periods required by the IRPF Law, as the application of the tax benefit depends on this.
What you should do
Before proceeding with the donation, it is necessary to confirm that the temporary residency requirements in the home are met. Since the transfer of bare ownership has implications for both the donor's IRPF and the donee's Inheritance and Gift Tax, it is recommended to assess each particular situation to ensure the operation complies with current regulations.
Frequently asked questions
- Is it necessary to have lived in the home for a minimum amount of time?
- Yes, it must have been the primary residence for three years or have been so in the two years prior to the donation.
- Does the exemption only apply if I donate the entire house?
- No, the exemption applies whether full ownership is transferred or only the bare ownership is transferred.