As we said in our last post, we are considering buying a house in Spain and are trying not to rush into things. However, there are many factors influencing our decisions. One of those is the fact that 2010 marks the end of automatic entitlement to tax relief on property purchases, (la desgravacion fiscal por compra de vivienda), in Spain.
From January 1st 2011, anyone with a declared annual income (renta annual) in excess of twenty four thousand euros, will no longer qualify for automatic mortgage tax relief.
In a nutshell , this basically means that:
– anyone with a declared annul income over 24.107€, that purchases a property in spain after 31.12.10 will no longer be entitled to the tax relief previously offered in relation to the interest on mortgage payments.
– anyone who purchases a property in Spain, with a declared annual income equal or inferior to 17.724€ will be entitled to a total deduction of tax relief and in the following year, a total of 15% up to the amount 9.040€
– anyone with a declared annual income between these two amounts, 17.724€ and 24.107€, will continue to enjoy mortgage tax relief calculated in a regressive manner. ie. a calculated percentage of relief that diminishes once we reach a salary of 24.107€
Confused yet? Even having read this many times I still was …
So, if we consider that the current mortgage tax relief assumes an annual rebate of up to 1.350€ based on 15%, capped at 9.015€. This would mean that over a 40 year mortgage we would receive a tax rebate of over 50.000€. Now, that is a lot of money to miss out on!
Some autonomous regions, such as Navarra, are continuing to offer the rebate but can we rely on this happening?
Property experts continue to disagree on the immediate future of the Spanish property market. Will prices continue to fall or will they even out? The only fact they seem to agree on is that prices are unlikely to reach previous highs and are not likely to increase in the immediate future.
Mortgages are obviously much more affordable at the moment due to the fact that the eurobar is at around 1.5% compared to 5.38% in September 2008. However, what will happen in the coming months? Who knows and how much risk are we willing to take? What may seem like an amazing deal today may become a noose around our neck in the future ….
Anyway, we have sent an email to the estate agent to ask his advice on our proposed offer before we actually make it. What will happen next? Who knows … we’ll keep you posted.