What is the homestead reinvestment exemption?
When we sell an apartment or a house, we obtain a series of benefits that will affect our income statement. However, the profits obtained in a purchase and sale operation will be exempt from payment if they are invested in the acquisition of another habitual residence or in the rehabilitation of the dwelling that is going to have this character. Real Estate
What is the term to reinvest in habitual residence?
If we want to benefit from this tax exemption, we must adjust to certain situations. Moreover, this supposed benefit does not occur automatically, since it depends on different factors , time being one of the most important. For example, if the reinvestment in the habitual residence is made in the same year in which the profit is made, there is no need to carry out any formal procedure . However, if this reinvestment occurs in a fiscal year other than the one in which the benefits were obtained, it will be necessary to indicate it in section G2, page 10, and in G5 on page 11 of the Income Statement. In any case, the maximum term for the reinvestment of the amount obtained must be made , once or successively (for example, in installments through a mortgage), in a period not exceeding two years . Likewise, the acquired home must become the habitual residence of the taxpayer (effectively and permanently) within a period of twelve months , counted from the date of acquisition or the completion of the appropriate works.
What happens if I make the reinvestment after this time? Can I benefit from the exemption in the payment of personal income tax?
If the purchase of a new main residence is made outside the two-year period, the benefits obtained will be computed as a “capital gain” in the Income Statement , and will be subject to the payment of the corresponding taxes, with a tax of 19.5%, without the possibility of enjoying the exemption for reinvestment in habitual residence. On the other hand, we must not forget that, for tax purposes, the property that constitutes their residence for a continuous period of at least three years is considered the taxpayer’s usual residence. The registration is not considered by itself a sufficient element for a dwelling to have such consideration , nor is moving or maintaining the fiscal domicile in a certain place. This situation affects both the home we sell and the one we have bought or are going to rehabilitate. Interior Design