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PROPERTY

Inheritance tax in Spain: Should you pass your property on to your children or sell it to them?

For older residents in Spain who don’t want the burden of owning a property anymore, deciding what to do with it can be a difficult decision to make. Here, we look at your options.

Published: 7 March 2021 12:06 CET
Updated: 15 February 2022 08:09 CET
old couple with house
Image: Huskyherz/Pixabay

Your decision on whether to pass your home on to your children or sell it should depend on several factors, including the price of your home, the taxes you have to pay on it, and which region of Spain you live in.

Passing your home on to your children

If you decide to pass your home on to your children, you must still settle the corresponding capital gains on your income tax declaration (IRPF), similar to if you sold it.

This is because simply gifting your home to your children is still taxable, however, it will be you that will have the responsibility to pay the capital gains tax and not your children.

If you have made a profit from the difference between the acquisition value of the property and the value of the property at the time of passing it on to your children, you will be taxed at your personal income tax rate between 19 and 23 percent, depending on how much profit you earned.  

However, if no profit was gained and the current value of the property is less than the acquisition value, then this loss will not be included in your personal income tax.

You will also be responsible for paying the corresponding municipal tax. How much you owe for this will depend on the town hall in the area where you live.

Your children may not have to pay the capital gains tax on the property, but they will still be liable to pay inheritance tax or gift tax. How much they pay will depend on the value of the property and the region of Spain where it’s located.

Selling your home to your children

For parents, your tax obligations are the same as if you simply passed your home onto your children – you will still be liable to pay the capital gains tax through your IRPF and the municipal tax.

Those who decide to buy their parents’ house from them must pay a Property Transfer Tax (ITP). The amount of this tax also depends on which region of Spain you live in and can vary between 6 and 11 percent.

EXPLAINED: How choosing the right region in Spain can save you thousands in inheritance tax

Common pitfalls

If you decide to sell your home to your children, remember that there must be an exchange of money, otherwise, it will still be counted as a gift. Your children must still purchase the property from you in the form of savings, a mortgage or a personal loan. If found out and there wasn’t actually an exchange of money, you could be fined.

You are also not allowed to sell your home to your children for an abnormally low price. Every home has a minimum value for tax purposes.

This value is calculated by the autonomous community in which it’s located. In some regions, the cadastral value is taken for reference, but each region has its own way of calculating it.

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For members

HEALTH

Are private health costs tax deductible in Spain?

Many expenses can be offset against taxes in Spain, but what about private health insurance and other medical costs? Can you deduct them in 'la declaración de la renta' (annual tax return)? It often depends on your circumstances and location.

Published: 2 May 2024 09:13 CEST
Are private health costs tax deductible in Spain?

Taxes are expensive in Spain, so anything that you can do to be able to make deductions or offset payments can help.

Not many people are aware that some private health costs such as health insurance can be tax deductible in Spain.

There are however certain requirements you must meet to be able to do this. It is generally only available to:

  • Self-employed workers registered as autónomo
  • Employed workers who have private medical insurance paid for by their companies
  • Companies that offer group health insurance to their employees.

This means that if you’re an employee who wants to get their own private medical insurance, unfortunately, you generally won’t be able to claim the payments back against tax.

READ ALSO – La Renta: What items can you deduct on your Spanish tax return?

Self-employed

If you run your own business or work for several different clients and are registered as autónomo in Spain, then you are able to deduct private health insurance.

Of course, you’ll already be covered by the public health system as you’ll be paying social security, but you may want to consider private health insurance too. The benefits include being able to get appointments faster and see specialists when you want.

Even though health insurance may be not completely necessary for carrying out your work, Law 35/2006 on Personal Income Tax states that it is deductible for self-employed people, provided they pay taxes through the direct estimation regime, which takes into account real annual income.  

It’s also possible to deduct private health insurance policies of your spouse and any children under 25 years old, as long as they live with you.  

  • You can deduct a maximum of €500 for each person in the family who meets these requirements, or a maximum of €1,500 if any of those people suffer from a disability.
  • Your total deduction for private health insurance as a family cannot exceed €4,500.  

It’s important to be careful when you’re taking out a private health insurance policy that you’re taking out the correct one for your circumstances, otherwise, you may not be able to claim it back. For example, if you want to be able to deduct your Sanitas expenses you have to take out the Sanitas Professional Plan only, you can’t pick and choose which you want. This means that if you want to be able to put this down as an expense you must communicate your intentions and situation with your chosen insurer first, so that they can advise you.  

READ ALSO: Record 850,000 people waiting to have an operation in Spain 

Employees who get private health insurance from their company  

If your company pays your private health insurance for you, it is considered to be a type of remuneration, but you are exempt from declaring it as work income, so are able to generate some tax savings on it.  

The limit is also €500 for each person included in the health insurance coverage. If the health insurance premiums exceed €500 per year, the rest will be taxed as a type of income.  

If you pay a portion of the health insurance yourself and your company pays the rest, you are also allowed to deduct these expenses.  

Tax-deductible medical expenses in the Canary Islands, Cantabria and Valencia

If you live in either the Canary Islands, Cantabria or Valencia, there are a set of special circumstances that allow you to offset health expenses against your taxes, no matter whether you’re self-employed or if your company pays private health insurance for you or not.  

Canary Islands  

It’s possible to deduct 12 percent of expenses and fees paid during the year for medical or health reasons including the prevention, diagnosis and treatment of diseases, dental health, pregnancy and childbirth, accidents and disability.  

Operations for aesthetic purposes are excluded unless they are intended to repair damage caused by accidents or are treatments aimed at helping those dealing with sexual identity.

It’s also possible to deduct 12 percent of the expenses paid for medical devices that compensate for physical deficiencies, such as glasses or hearing aids. 

The total amount deductible is €600 per year for individuals and €840 if joint a declaration is filed. If the taxpayer has a disability equal to or greater than 65 percent, an additional €100 deduction is added.

READ ALSO: Is it better to do a joint or separate tax declaration if you’re a couple in Spain?

Cantabria

If you live in Cantabria you are able to deduct 10 percent of private health services for illness, dental health, pregnancy, childbirth, accidents and disability. You can either claim it for yourself or your immediate family who live with you.  

The limit is €500 for individuals and €700 for joint declaration. These limits will be increased by €100 for those with a disability equal to or greater than 65 percent, and by a further €100 for each taxpayer with this disability, in the case of a joint declaration. 

Valencia

This year, the government of Valencia has also included a deduction for certain health expenses.

€100 can be deducted for the treatment and care of people affected by highly complex chronic diseases and “rare” diseases, as well as €100 for care for those diagnosed with acquired brain damage or Alzheimer’s disease. This will be extended to €150 for single-parent families.  

You can also deduct 30 percent of the expenses for:

  • Services and treatments linked to non-aesthetic oral health, with a maximum limit of €150.
  • Services related to mental health, with a maximum limit of €150.
  • Prescription glasses, contact lenses and cleaning solutions, with a maximum limit of €100.

Remember that if you live in any of these three regions and you want to be able to offset your medical expenses against taxes, you will need to pay with card and have proper invoices and receipts to prove what you have paid for.  

If you are unsure about what expenses you can claim, it’s best to contact your gestor or another tax professional to check about your specific situation beforehand. 

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