“ 11

ENE

Income Tax Expenses When Selling a Property

EVERYTHING YOU NEED TO KNOW ABOUT INCOME TAX WHEN SELLING YOUR HOME IN 2025

At Agrucasa, we want to offer you this article that we have written with great enthusiasm, as we believe it can be very helpful in understanding how income tax works when you sell a property in Spain. Our intention is to provide you with as much information as possible on the subject. We hope it is not too lengthy, but it is important for us to cover as many possible situations as we can.

If you have sold a home in Spain or are thinking about selling one, you will need to face several expenses that can significantly reduce the net profit of the transaction. One of the most important is the income tax, which directly affects the gain obtained. This tax applies to the difference between the selling price and the purchase price of the property, taking into account certain expenses and improvements made to the property. Below, we explain how income tax is applied when selling a home in 2025.

How Is Income Tax Calculated When Selling a Home?

Income tax is calculated based on the gain you have made, that is, the difference between what you paid for the home and what you obtained from selling it. This gain is divided into brackets, and a percentage is applied according to the bracket in which it falls.

Below, we show you the brackets for 2025:

Up to 6,000 euros: 19% is applied
From 6,000 to 50,000 euros: 21% is applied
From 50,000 to 200,000 euros: 23% is applied
More than 200,000 euros: 26% is applied

It is important to note that these percentages are not applied to the total sale price but to the gain you have obtained.

Practical Example

Suppose you sell your home for 300,000 euros and you bought it for 200,000 euros, giving you a gain of 100,000 euros. According to the income tax brackets for 2025, the gain would be taxed as follows:

The first 6,000 euros are taxed at 19%, meaning you would pay 1,140 euros.
From 6,000 to 50,000 euros, 21% is applied, which would be 9,240 euros.
The next 50,000 euros are taxed at 23%, which amounts to 11,500 euros.

In total, you would pay 21,880 euros in income tax, unless you apply some of the exemptions that we will discuss later.

Selling a home can bring a significant tax burden, but knowing the income tax brackets and possible exemptions will help you do your calculations and better manage the process.

FISCAL IMPLICATIONS OF INCOME TAX FOR NON-RESIDENTS WHEN SELLING PROPERTIES IN SPAIN

Selling a property in Spain as a non-resident entails several tax obligations different from those of residents, as they are subject to a different tax regime. Below, we will address in detail the implications of the Non-Resident Income Tax (NRIT) and other important tax aspects to consider.

3% Withholding

The buyer of a property owned by a non-resident must withhold and pay 3% of the sale price to ensure that the seller complies with their tax obligations as a non-resident. The buyer must make this withholding and pay it using Form 211.

Non-residents must declare and pay the capital gains tax through Form 210, which is submitted to the Tax Agency.

In some sales, the buyer who withholds 3% from the non-resident seller, when they have to submit Form 211 to pay it, needs someone to submit it for them, either the Notary if they also handle the tax payment or an office, which implies an extra cost for submitting the tax, as the person managing the submission of Form 211 will charge for these services. This can create a conflict over who should bear the additional cost of submitting the tax.

What the tax agency tells us: The buyer must withhold and pay, which means that it is the buyer's responsibility to submit Form 211.

What tax rates apply to Capital Gains for non-residents:

19% for residents of the European Union (EU) and the European Economic Area (EEA).
24% for non-residents outside the EU/EEA.

When you sell a property at a loss or with little capital gain and want to request a refund of the 3% withheld by the buyer, you must request the refund using Form 210. This tax must be paid within four months of the sale date.

DEDUCTIBLE EXPENSES WHEN SELLING A PROPERTY FOR RESIDENTS AND NON-RESIDENTS

When you sell a property, you should not only consider the sale price but also the expenses you can deduct to correctly calculate your capital gain. These expenses can reduce the impact of the personal income tax (IRPF), and it's important to know them.

Repairs and Improvements

If you have made repairs or improvements that increased the property's value, these expenses can be deducted. It is important to keep the invoices that justify these expenses, as only in this way can they be taken into account. Furthermore, the improvements must have been made in recent years and be properly documented.

Mortgage Cancellation Costs

If you still had a mortgage on the property and canceled it at the time of sale, the costs associated with this cancellation can also be deducted. This includes notarial fees, registry fees, and any penalties you may have had to pay for early repayment of the loan.

Acquisition Costs

Another deductible expense is related to the acquisition of the property, such as the taxes you paid when buying it, like the Transfer Tax, as well as notarial and registry fees of the purchase.

How to Calculate the Capital Gain

To calculate the capital gain and know what part is subject to IRPF, the formula is quite simple:

Capital Gain = Sale Price - (Acquisition Price + Justified Expenses)

Let's imagine the following example:

Sale price: 300,000 €
Acquisition price: 200,000 €
Improvement expenses (with invoices): 20,000 €
Mortgage cancellation costs: 2,000 €
Other deductible expenses: 3,000 €

The capital gain would be:

300,000 € - (200,000 € + 20,000 € + 2,000 € + 3,000 €) = 75,000 €

This means that your capital gain would be 75,000 euros, and only this amount would be subject to the corresponding IRPF.

It is important to keep all invoices and documents that support these expenses, as they will help you justify the deductions to the tax authorities.

I would like to comment that the tax agency should consider other expenses that should be deductible, such as those generated by the community, which are currently not taken into account, like community fees and special assessments, as they are part of the building's maintenance.

For example, a homeowner who has paid 300€ per year in community fees for 30 years, this is a significant amount of money, not to mention any special assessments that may have been generated in the community over those 30 years.

TAX BENEFITS AND EXEMPTIONS FOR NON-RESIDENTS

Tax Treaties and Deduction for International Double Taxation:

Spain has tax treaties with several countries to avoid double taxation. These treaties determine which country has the right to tax certain income, including capital gains.

For example, the tax treaty between Spain and the United Kingdom allows Spain to tax the capital gain, but the taxpayer can obtain a credit for the tax paid in Spain when filing their taxes in the United Kingdom, thus avoiding being taxed twice on the same income.

TAX BENEFITS AND EXEMPTIONS FOR RESIDENTS

Although the personal income tax (IRPF) on capital gains can be significant, there are certain exemptions and benefits that can help you reduce or even eliminate the tax burden. Here are some of the most relevant ones:

Seniors over 65: Residents aged 65 or older who sell their primary residence may be exempt from capital gains tax, provided they have lived in the property for at least two continuous years prior to the sale date.
If the money is not reinvested in another property, to meet this condition, the total amount obtained from the sale must be used within six months to set up a life annuity in their favor, under the conditions stipulated by regulations. The maximum total amount that may be allocated for this purpose to constitute life annuities will be 240,000 euros.
Severe or high dependency: If you are in a situation of severe or high dependency under the Law on the Promotion of Personal Autonomy and Care for People in Situations of Dependency and sell your primary residence, you will be exempt from the capital gains tax.
Reinvestment in a primary residence: If you reinvest the entire amount from the sale in the purchase of a new primary residence, you may be exempt from paying the personal income tax on that gain. This exemption applies if the reinvestment is made within two years before or after the sale, either in Spain or in another country of the European Union or the European Economic Area, as long as it becomes your main residence.
When the amount reinvested is less than the total received from the sale, only the proportional part of the capital gain corresponding to the reinvested amount will be excluded from taxation. The law does not specify any sale amount or if you have multiple properties; the important thing to qualify for this deduction is that it must be your primary residence.
Persons with Disabilities: There is a personal and family allowance that increases depending on the degree of disability of the taxpayer, their ascendants, or descendants. This allowance reduces the taxable base, decreasing the amount on which taxes are calculated.
The amounts of this allowance vary according to the degree of disability and the need for third-party assistance or mobility difficulties.
Autonomous communities may establish specific deductions for persons with disabilities that can be applied to the total personal income tax.
It is important for persons with disabilities to be properly informed about the available tax benefits and to certify their disability to take advantage of them.

Partial Exemptions

Urban Properties Acquired between May 12, 2012, and December 31, 2012, may have a 50% exemption.

The 50% exemption on capital gains for properties acquired between May 12, 2012, and December 31, 2012, was a measure designed to encourage the buying and selling of properties during an economic crisis, with the goal of reactivating the real estate market.

To qualify for the 50% exemption, the property must have been used as the seller's habitual residence for a minimum period. Generally, it is considered habitual residence if the seller has lived in the property continuously for at least three years before the sale. However, it will be understood that the property had the character of a habitual residence when, despite not having elapsed this period, certain circumstances arise that necessarily require a change of residence.

It is recommended to consult a tax advisor because, depending on the autonomous community, this reduction may vary or other conditions may be established in the regulations, such as limits on the property value or the amount of the capital gain.

Reduction Coefficients or Abatement for Properties Acquired Before 1994

If you bought your property before December 31, 1994, you may benefit from reduction coefficients when calculating the capital gain, which can reduce the amount on which taxes are applied.

Why is this reduction applied? Because the value of money has changed over time, and properties acquired many years ago have suffered inflation.

Real Estate and Reduction Coefficients:

Coefficient: 11.11% for each year of stay exceeding two years from the acquisition until December 31, 1996.

Reduction Percentages by Years of Stay until December 31, 1996:

Up to 2 years: 0% (Purchased from 31-12-1994 to 31-12-1996)
Up to 3 years: 11.11% (Purchased from 31-12-1993 to 30-12-1994)
Up to 4 years: 22.22% (Purchased from 31-12-1992 to 30-12-1993)
Up to 5 years: 33.33% (Purchased from 31-12-1991 to 30-12-1992)
Up to 6 years: 44.44% (Purchased from 31-12-1990 to 30-12-1991)
Up to 7 years: 55.55% (Purchased from 31-12-1989 to 30-12-1990)
Up to 8 years: 66.66% (Purchased from 31-12-1988 to 30-12-1989)
Up to 9 years: 77.77% (Purchased from 31-12-1987 to 30-12-1988)
Up to 10 years: 88.88% (Purchased from 31-12-1986 to 30-12-1987)
Up to 11 years: 100% (Purchased from 31-12-1985 or earlier to 30-12-1986)

The related reduction percentages do not apply in any case to capital losses or to the part of the capital gain generated from January 20, 2006, to the date of transmission.

EXAMPLE OF REDUCTION COEFFICIENT APPLICATION

Let’s assume the following:

Acquisition date of the property: January 1, 1990.
Acquisition price: 100,000€
Sale date of the property: January 1, 2025.
Sale price of the property: 400,000€
Improvement made in 2010 with a cost of: 50,000€

Calculation of Capital Gain without Applying Reduction Coefficients

Acquisition price plus improvements made on the property: 100,000€ + 50,000€ = 150,000€
Capital Gain: 400,000€ - 150,000€ = 250,000€

Calculation of Different Types of Capital Gain Percentage Before January 20, 2006, and After January 19, 2006

Since reduction percentages do not apply to capital gain generated from January 20, 2006, until the transfer date, it is important to know how to calculate it.

1. Calculation of Days:

From January 1, 1990, to January 19, 2006:
16 years X 365 days + 19 days of January = 5,859 days

From January 1, 1990, to January 1, 2025:
35 years X 365 days = 12,775 days

2. Calculation of Capital Gain:

Gain generated before January 20, 2006:
Capital gain 250,000€ X 5,859 days = 1,464,750,000 / 12,775 days = 114,657€

Gain generated from January 20, 2006:
250,000€ - 114,657€ = 135,343€

Application of Reduction Coefficients

For real estate, the reduction coefficient is 11.11% for each year of stay exceeding two from the acquisition until December 31, 1996.

Calculation of Reduction:

Years of stay until December 31, 1996: 6 years
Years to consider for the reduction: 6 years - 2 years = 4 years
(The law states that a reduction coefficient of 11.11% applies for each year from the second year, which means the coefficient counts from the second year. Since 6 - 2 = 4 years, according to the table, 6 years equals 44.44%)
Reduction: 11.11% X 4 years = 44.44%
114,657€ X 44.44% = 50,953€

Total Capital Gain

Gain before January 20, 2006: 50,953€
Gain from January 20, 2006: 135,343€

Total Gain: 50,953€ + 135,343€ = 186,296€

Application of the Different IRPF Brackets to the Gain of 186,296€:

6,000€ X 19% = 1,140€
44,000€ X 21% = 9,240€
136,296€ X 23% = 31,348€

Total IRPF: 1,140€ + 9,240€ + 31,348€ = 41,728€

Important: To apply the reduction coefficients to the capital gain from the sale of a property acquired before December 31, 1994, the total transfer value of all patrimonial elements sold from January 1, 2015, until the current transfer date must not exceed 400,000 euros.

Remember that tax regulations are constantly evolving, so it is essential to stay informed about the latest updates.

I would like to mention that, from my point of view, the reduction coefficients help to reduce the amount to be paid significantly, but I find them outdated since each year that passes from January 2006 continues generating inflation and loss of money value, and the effectiveness of these reducers decreases as the years go by after 2006.

I also have to say that I don’t quite understand where these coefficients came from and their limited effectiveness over the years. From my point of view, if we consider an annual inflation rate of 1.5% to 2%, the logical thing would be to calculate the accumulated effect of inflation on the property value.
For example, if a property was purchased 30 years ago, it would be fair to take those 30 years and multiply them by the 1.5% annual inflation, which would give us a reduction coefficient of 45%, which would be much more realistic and aligned with the actual increase in value due to inflation.

We hope this article has been helpful, and we recommend consulting with a specialized tax advisor to ensure you apply all deductions correctly and comply with the current regulations, avoiding potential future problems.

Find Your Ideal Home on the Costa Blanca and Mar Menor, with Exclusive Offers in Torrevieja and Orihuela Costa

Advanced search