People over the age of 65 or those with severe or significant dependency may sell their primary residence without paying income tax. However (and until this Tuesday), applying this exemption could present obstacles when the person transferring the property did so some time after moving out to live with family members or move into a nursing home.
In such cases, the property could lose its tax status as a primary residence, meaning that the gain from its transfer would have to be reported. As a general rule, the Income Tax Law stipulates that, for the exemption to apply, the property being transferred must be the primary residence or must have had that status within a maximum period of two years prior to the date of transfer.
However, one of the housing decrees approved by the Council of Ministers on Tuesday, October 6, provides for a new exception that would allow the transfer to be made without paying income tax, provided certain requirements are met.
What Changes with the New Decree
On Tuesday, the Council of Ministers once again approved the two housing decrees that were ultimately not ratified by Congress. Following the call for elections, this time the decrees could be ratified by the Permanent Deputation, where the government does have sufficient support.
These are not exactly the same decrees that the government tried to push through last week. The decrees approved this Tuesday include some modifications, but, according to President Pedro Sánchez, “they retain the essence of those that were withdrawn” last Friday.
One provision that has been retained is the income tax exemption for individuals over 65 years of age and those with severe or significant dependency who transfer their primary residence under certain conditions.
Specifically, it states that the property could continue to be considered a primary residence if it was one up until the moment the person moved“to a specialized facility or to the home of a relative up to the third degree of kinship by blood or marriage, due to their age or state of dependency.”
The key: age and dependency status
Thus, if the requirement is met that the move to a care facility or a relative’s home was due to age or a state of dependency, the date of the move—rather than the date of the transfer—will be used as the reference point for applying the exemption.
For example, a person over the age of 65 who has resided in a property until the time of moving into a nursing home may qualify for the exemption even if more than two years have passed since they last resided there as their primary residence on the date of sale.