TEAC Allows Mortgage Repayment Deduction After Selling a Main Home

New TEAC doctrine: The deduction for a main home can also cover mortgage repayment after its sale

The Central Economic-Administrative Tribunal (TEAC), which is part of Spain’s Tax Agency (AEAT), issued ruling 00/02995/2025 on 20 October 2025. It significantly changes the approach previously applied to the personal income tax (IRPF) deduction for investment in a main home. Read a report on the ruling.

What does the new approach establish?

The TEAC has unified the doctrine and determined that, when a taxpayer sells their main home (acquired before 1 January 2013) and uses part of the sale proceeds to repay the mortgage secured on that home, the amount used to repay the loan may be treated as investment in the main home for deduction purposes.

The key requirements are:

1. The property sold must have been the taxpayer’s actual main residence up to the date of transfer.
2. The home must have been acquired before 1 January 2013, when the deduction was discontinued for new acquisitions.
3. The taxpayer must already have claimed the deduction in previous tax years under the transitional regime in Additional Provision 18 of Law 35/2006 on Personal Income Tax.

Practical implications

• Until now, the AEAT had taken the view that the deduction ended immediately when the main home was sold. It therefore accepted only mortgage payments made up to the day before the sale and excluded the amount paid off with the sale proceeds. See the report on the previous approach.
• Under the TEAC’s new approach, the mortgage repayment may be included in the deduction base. Under the transitional regime, this could bring the annual base up to €9,040 and the maximum deduction up to €1,356 (15% of that base). Further coverage.
• The article, written following the October 2025 ruling, identified unprescribed tax years—typically 2021, 2022, 2023 and 2024—as years for which amended returns could be considered.

Recommendations

• Check that the client acquired the home before 1 January 2013 and claimed the deduction in previous years.
• Establish whether part of the sale price was used to repay the outstanding mortgage and retain documentary evidence of that payment.
• If the deduction was restricted or the mortgage repayment was excluded, consider whether an amended return may be appropriate for the relevant unprescribed years, supported by documents for the sale and repayment.
• Confirm that the property remained the taxpayer’s main residence until the sale (or shortly before it), to reduce the risk of disagreement with the AEAT.
• Estimate the additional deduction and explain the potential benefit to the client. The original article noted that, in many cases, the additional refund could exceed €1,000.

Assessment

The TEAC ruling is a significant correction to what many practitioners regarded as an overly restrictive interpretation of the main-home deduction. Its scope remains limited to homes acquired before 2013 where the deduction had already been claimed, but it opens a potentially useful route for taxpayers who sold their home and repaid the mortgage.

From a tax perspective, it may release tax liquidity for people who thought they had exhausted their deduction or had not claimed it in full. Tax advisers should review potentially affected files while the relevant limitation periods remain open.

Conclusion

The TEAC’s new doctrine confirms that the main-home investment deduction may also apply when, after selling the property, the taxpayer uses the proceeds to repay the mortgage. Anyone who meets the requirements should assess the possibility and, where appropriate, consider filing an amended return.

Read the original article in Spanish.