Personal Income Tax exemption for the sale of a primary residence after turning 65

The application of the exemption in Personal Income Tax (IRPF) for the transfer of a primary residence for those over 65 depends on a determining temporal factor: the moment when the transfer of the asset is understood to have occurred.

What the DGT has ruled

The Dirección General de Tributos (DGT) has specified that the exemption requires having reached 65 years of age on the date of the transfer. According to the regulations, the transfer is understood to have occurred in the tax period in which the asset is delivered, which usually coincides with the execution of the public deed.

In this sense, if the delivery of the residence is carried out after having turned 65, the taxpayer may apply the exemption, provided that the residence has maintained its status as a primary residence until two years before the transfer. Likewise, the ruling addresses the nature of previous payments:

• Earnest money (arras) is considered a payment on account of the price.
• Rents received in a lease-to-purchase contract reduce the transfer price.

What it means for you

If you plan to sell your primary residence, the fulfillment of the minimum age must take place before the effective delivery of the property. It is not necessary to have reached 65 years of age at the time of signing an earnest money contract or a lease-to-purchase agreement, as long as the formalization of the deed and the delivery of the asset occur once that age has been reached.

It is fundamental to understand that amounts received as earnest money or rents from a lease-to-purchase agreement do not constitute independent rental income, but rather form part of the transfer price, directly affecting the calculation of the capital gain or loss.

What you should do

It is necessary to analyze the chronology of the legal acts that constitute the sale. The date of delivery of the asset is the milestone that determines the application of the age exemption. Since the interpretation of earnest money contracts and lease-to-purchase agreements influences the calculation of the transfer price, it is recommended to assess each particular situation to ensure that the transfer is correctly framed within the tax period and under the conditions of the IRPF Law.