Sole owners of a property with a joint mortgage may only deduct 50% of the installments

A recurring issue in income tax returns is the application of the deduction for investment in the primary residence when there is a discrepancy between the ownership of the property and the ownership of the mortgage loan. The Directorate General of Taxes (DGT) has established its criteria on this scenario, which directly affects individuals who are the sole owners of a home but share the mortgage debt with other borrowers.

What the DGT has ruled

The query analyzed whether a taxpayer, being the sole owner of a property, could apply the deduction for investment in the primary residence to 100% of the mortgage installments they actually paid. The inquirer argued that, as the sole owner, the payments made corresponded entirely to their investment.

However, the DGT has ruled that, because there are two joint borrowers, it is legally understood that the installments are satisfied in equal parts, regardless of who provides the actual funds. According to Personal Income Tax (IRPF) regulations and the Civil Code, the obligation to pay is divided among the signatories of the loan. Therefore, the administration considers that each borrower can only deduct their proportional share of the debt.

What this means for you

If you are the sole owner of a property but the mortgage was signed jointly with another person, the general rule is that you may only deduct 50% of the mortgage installments. The fact that you are the one disbursing the total amount does not automatically grant you the right to the full deduction.

To be able to apply the deduction for 100% of the payments, the regulations require rigorous documentary proof. You must prove that the other borrower has lent you their share of the debt (the remaining 50%) through a formal loan with interest and conditions similar to those of the market.

What you should do

In this situation, it is necessary to analyze the structure of the debt and the ownership of the property. If you intend to apply the deduction to the totality of the installments, you must have the documentation that supports the loan between the borrowers. If no such formal loan exists, the deduction will be limited to your proportional share of the mortgage debt and the amounts used to amortize the personal loan received from the other co-borrower.