Personal Income Tax exemption for the donation of a primary residence by individuals over 65

The transfer of real estate assets usually involves determining a capital gain or loss in the Personal Income Tax (IRPF) return. However, the Dirección General de Tributos (DGT) has clarified a case of exemption relevant to individuals who decide to transfer their primary residence.

What the DGT has ruled

The query concerned whether the donation of full ownership of the primary residence to children generated a taxable capital gain. The DGT's criteria establish that the capital gain resulting from the donation of full ownership is exempt when two concurrent requirements are met:

• Age of the transferors: They must be over 65 years of age.
• Nature of the property: It must be the primary residence, understood as continuous residence for at least three years, or having been so in the two years prior to the transfer.

It is important to highlight that this exemption is applicable whether full ownership is transferred or if it only concerns the bare ownership.

What it means for you

If you are over 65 and own a home in which you have resided continuously during the period required by the regulations, the donation of this property to your heirs or children will have no tax impact on your Income Tax return. This prevents the difference between the acquisition value and the transfer value from becoming a taxable base that increases your annual tax burden.

What you should do

In the event of a possible asset transfer, it is necessary to verify that the residence periods required by the IRPF Law and the IRPF Regulations are strictly met. Since the exemption depends on the status of the property as a primary residence and the age of the donor, each wealth situation must be analyzed to ensure that the technical requirements demanded by the Tax Administration are fulfilled.