How to sell my house without paying taxes (individual)

If you have thought about selling your house and you have started to make numbers, you have probably taken a big annoyance when calculating the taxes that you will have to pay; maybe you have even lost the desire to sell it, why should the tax authorities earn more money than me if it is my house? Here we are going to explain 3 scenarios in which you will be free to declare the capital gain when selling your house.

The first thing before continuing reading this post is to make clear that we are going to focus on the sale of housing as an individual. If you have your house in the name of a company, this article will not be of interest to you (we will publish one in the future to talk about this specific topic). But if the house is in your personal name then yes, there are 3 legal ways of not having to declare the capital gain when selling your house:

1. Reinvestment in the next habitual residence: this case is applicable to all, independently of the age or physical condition of the one who sells. It only has one condition, which we will see below.
2. If you are over 65 years old: if it is your habitual residence you will not have to pay anything whether you sell it for a sum of money or in exchange for an annuity. You can also benefit from this tax advantage if you sell the bare property but keep the usufruct of it.
3. People in a situation of severe dependency: The tax agency makes it very clear; you do not have to pay anything for the benefit of your home "if you are a person in a situation of severe dependency or great dependency in accordance with the Law for the promotion of personal autonomy and attention to people in a situation of dependency."

In these last two cases the tax agency will require you to prove that the property you are transferring has been your habitual residence for at least the last two years until the sale of the same. For this you will have to provide a certificate of census registration, invoices of basic services such as electricity and water, etc.

Reinvestment in first home

This case is universally applicable, regardless of your age or special conditions. Nor is it a requirement that you are the sole owner of the property, since this exemption also applies, for example, if two or more owners of a property decide to sell their home to buy another one, as long as they meet the same requirements, such as being their primary residence.

What is considered to be a principal residence?

For this exemption to apply, it is essential that the property sold has been used as the seller's principal residence for a continuous period of at least three years prior to the sale. In addition, it must also have been occupied permanently and continuously for a period not exceeding 12 months from the purchase of the property or the completion of the works. That is to say, since you buy it you have a maximum of one year to inhabit it continuously. On the other hand, the tax office establishes some requirements by which you could sell the house, without having to declare the capital gain, before that period of 3 years:

1. Celebration of the marriage.
2. Marital separation.
3. Labor transfer.
4. Change of employment or analogous situation.
5. That the house turns out to be inadequate for the new circumstances of the owner (accident and handicap, for example).

Term and amount for the reinvestment

The tax office is very clear on this matter: we have two years to carry out the reinvestment from the moment of the sale. It can be done all at once or in successive periods, always within the period of those two years. There is also the possibility of buying the new habitual residence before selling the current one; that is to say, the order can be the inverse. The term will also be two years from the purchase of the new home until the sale of the current one.

As for the amount, you will have to reinvest 100% of the money of the sale in the new home. If you only reinvest 80% you will have to declare the capital gain of the remaining 20%.

If you also know how to find good investment opportunities and find houses below their market price, or opportunities of revaluation through reforms to increase the value of the property, you could change house tax free increasing the value of the initial investment.

Over 65 Exemption

If you are over 65 years old and you are thinking of selling your habitual residence, there is not only good news for you, but also better news since in this case you will not have to reinvest the money obtained from the sale of your home. According to the Spanish Tax Agency, people over 65 years of age are exempt from paying Capital Gains Tax on the sale of their primary residence. This means that you will not have to pay taxes on the profit obtained from the sale.

It is an excellent way for those owners who have a second vacation home to move definitively and allocate 100% of the money obtained from the sale of their previous home to an investment fund or directly to be able to dispose of that amount for their use and enjoyment.

Consultation with Experts

Obviously, this is a generic article and each situation requires a particular and exhaustive study. At Valido Home, we always recommend consulting with a tax advisor or a lawyer specialized in real estate to make sure you meet all the requirements and to obtain personalized guidance in the sale process. If you are interested and you think you can benefit from these advantages, and you also want to do things right, do not hesitate to contact us. You can do so via whastapp, our contact page or by booking a no-obligation call.