Maximum accumulated depreciation

If you are a landlord, one of the most important expenses you can deduct when declaring your income tax for the income from real estate capital derived from renting properties is the depreciation of the building:

• You can account for as an expense the greater amount between 3% of the acquisition cost of the property and 3% of the cadastral value (in both cases based on the value of the building, excluding the land value).
• If you are unaware of the acquisition costs of the building and the land, apply the proportion established in the cadastral values (which often appears on the IBI receipt). If the cadastral values change in subsequent years and this proportion changes, you must depreciate the property based on the new proportion.

If you acquired the property by inheritance or donation, the value on which the 3% depreciation should be applied is also the greater amount between the cadastral value and the acquisition cost (also excluding the portion attributable to the land). And, in this case, the acquisition cost is the value of the property (excluding the land) declared in the Inheritance and Donations Tax (ISD) plus the rest of the costs incurred (in proportion to the value of the property, excluding the land).

Well, the Tax Agency has clarified that, from the moment the accumulated depreciation reaches the acquisition value of the property (excluding the land value), it is no longer possible to continue depreciating the property.

For these purposes, please note that currently taxpayers declaring income from real estate capital must provide in their income tax return all the necessary data to calculate the depreciation of rented properties: acquisition value and date, improvements made, cadastral values, whether the property was acquired for consideration or gratuitously, etc. In this way, the Tax Agency can easily verify if the deducted depreciation is correct.

Therefore, if you rent properties, it is important that you keep a thorough record of the declared depreciations, especially for those properties that have been rented for many years. This will help you avoid possible adjustments from the Tax Agency for over-depreciating.

 

If you receive income from the rental of properties, consult us. We will advise you on all the expenses you can deduct and the incentives you can apply in your income tax, so that you do not pay more than necessary.