Deduction for main residence

Many people who bought their homebefore 2013 are allowed, under a special regime,to deduct in their income tax return(IRPF) what they pay for the mortgage on that house. Now, what happens if they decide to sell their house and with that moneyfinish paying off the remaining amount of the mortgage? Can theydeduct that amount in the income tax return, even if the money comes directly from the sale of the property?

The Tax Agency (AEAT) usually says no, because it considers that, by using the money from the sale to cancel the mortgage, thathouse is no longer the "main residence" and, therefore, the deduction is not applicable. However, the Central Economic-Administrative Tribunal (TEAC) disagrees. According to the TEAC, the key point is that this money is used tosettle the mortgage on the home that was the main residence until the sale. They don't care if the money comes from your savings or from the amount paid by the buyer, therelevant aspect is the purpose of the payment, not its origin.

The TEAC's position has been supported by several judgments from higher courts. Even in cases where, upon selling the property, it is agreed thatpart of the price goesstraight to the bank to close the mortgage, the courts have understood that the requirements are met, considering the sale and payment of the mortgage as asingle act.

In conclusion, when you sell your main residence and the money is used topay off the remaining mortgage, that amount can be added to the deduction base in the Personal Income Tax Return, as long as you comply with the limits and legal rules. Ifthe Tax Office has denied this deduction and you overpaid, it is possible toclaim the refund and assess possible damages and losses.

Faced with situations like the one described, our professionals will take the appropriate actions for the refund of the improperly paid amount and analyze the responsibilities for the compensation of the damages caused