After separating, I was awarded the home and now I am moving to another one. Can I claim the main-home deduction?
There are many possible situations following divorce or separation. This case concerns a divorce from a marriage under the community-property regime. One spouse is awarded the former main home, for which they had claimed the corresponding deduction on their tax return. They now buy a new home, which becomes their main residence.
Will they be entitled to the main-home deduction?
In summary, where a taxpayer acquires a main home after having claimed the deduction for acquiring other previous main homes, they cannot claim a deduction for acquiring or renovating the new home until the amounts invested in it exceed the amounts invested in the previous homes to the extent those amounts were deducted.
The expression “amounts invested in it” refers to all amounts the taxpayer paid to acquire the home from the time they first acquired the undivided share over which they hold full ownership, and not only from the date of the divorce judgment.
As for the maximum amount forming the deduction base in each tax year, the home was acquired while the taxpayer was married to their now-former spouse under the community-property regime and was financed through a mortgage for which both were borrowers. Although the taxpayer pays 100% of each instalment, only the portion corresponding to the share they fully own is included in the deduction base, without prejudice to any adjustments between the former spouses.
For reference, the deduction for investment in a main home is set out in Articles 68(1) and 78 of the Personal Income Tax Act, approved by Law 35/2006 of 28 November (Official State Gazette of 29 November; hereinafter, the PIT Act). Article 68(1)(1) establishes the general framework: subject to certain requirements and circumstances, taxpayers may deduct a specified percentage of “the amounts paid during the relevant tax period to acquire or renovate a home that constitutes or will constitute the taxpayer’s main residence.”
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