Taxpayers may maintain the deduction for investment in primary residence when replacing their mortgage loan

Natural persons under the transitional regime for the deduction for investment in the primary residence have a guarantee of fiscal continuity when restructuring their debt. The Dirección General de Tributos (DGT) has clarified the treatment of this deduction in scenarios where the taxpayer decides to replace their current mortgage loan with a new one under different conditions.

What the DGT has resolved

The Administration's criteria establish that replacing one loan with another does not exhaust the right to claim the deduction, provided that the purpose of the new loan is the amortization of the previous one. In cases where the cancellation of the previous debt and the signing of the new loan contract are carried out in a single act, the right to the deduction for the installments and expenses generated remains intact.

Furthermore, the resolution confirms that the expenses derived from the new operation, such as appraisal, notary fees, and registration costs, are also deductible under this assumption. However, the key lies in simultaneity or direct connection: if the cancellation of the debt and the contracting of the new loan occur at different times and without a clear link, the right to the deduction for the new financing would be lost.

What this means for you

If you are entitled to the deduction for investment in the primary residence and are considering changing the conditions of your mortgage, the continuity of this tax benefit depends on how the operation is executed. The regulations of Law 35/2006 allow for this flexibility, but require that the restructuring be a substitution operation and not a cancellation followed by a new, independent contract.

What should be done

To ensure the preservation of this tax benefit, it is fundamental that the substitution operation is formalized in such a way that the new debt directly absorbs the previous one. It is necessary to verify that the documentation reflects the connection between both loans to prevent the Administration from interpreting the new financing as an operation unrelated to the original deduction right. It is recommended to assess each particular case to confirm that the structure of the operation complies with the DGT requirements.