Sale of primary residence by individuals over 65: the residency requirement

The General Directorate of Taxes (DGT) has clarified the necessary conditions for taxpayers over 65 to benefit from the exemption on capital gains derived from the transfer of their primary residence. This criterion is fundamental for those who have used their property for temporary rental purposes before its sale.

What the DGT has ruled

The inquiry focuses on the application of article 33.4.b) of the Personal Income Tax Law (LIRPF). The DGT establishes that, for a property to be considered a primary residence, there must be continuous residence for at least three years, which implies an effective and permanent use of the property. The taxpayer must be 65 years old, and the property must have been their primary residence up to a maximum of two years before the transfer.

A key point of the ruling is the impact of leases. If the property is rented for seasonal periods, the exemption cannot be applied if the sale is carried out before three years have passed since the termination of the last rental contract. However, the exemption could be recovered if the taxpayer returns to reside in the property on a permanent basis for a minimum period of three years following the last lease.

What it means for you

If you are an individual over 65 and intend to sell your home to avoid paying tax on capital gains, you must take into account that the use of the home cannot be intermittent or merely occasional. The fact that the home has been rented can interrupt the primary residence status required for the exemption.

Specifically, if the property has been subject to temporary rentals, the calculation of the three years of effective residence will begin to count again from the moment the last contract ends and permanent cohabitation in the home resumes.

What you should do

It is necessary to verify the usage history of the home before formalizing any sale operation. If rental periods have occurred, it must be checked whether the requirement of three years of continuous residence required by current regulations is met. Since the interpretation of effective residence is decisive for tax savings, it is recommended to assess the particular situation of each property and its occupation history.