- Personal income tax (IRPF) gains three temporary deductions of 20 %, 40 % and 60 %, depending on the energy savings the works achieve.
- They apply to works carried out from 6 October 2021, until the end of 2022 (20 % and 40 %) or 2023 (60 %).
- They require an energy certificate and traceable payments; subsidies received reduce the deduction base.
Royal Decree-Law 19/2021 of 5 October, published in the BOE on 6 October 2021, adopts urgent measures to boost building renovation under the Recovery Plan. Among them, it creates three temporary deductions in the state portion of personal income tax for those who carry out works that improve the energy efficiency of their home.
It is a tax incentive that adds to direct aid for renovation and seeks to speed up the renewal of a housing stock that is largely old and inefficient. The deductions apply to works carried out from that same 6 October 2021 and vary according to the level of energy improvement achieved, which must be documented. As a deduction from the tax due, its value depends on the income tax actually paid, so not every taxpayer will be able to use it in full.
Three deductions, three levels of improvement
The first is 20 % and requires the works to reduce heating and cooling demand in the home by at least 7 %, with a maximum base of €5,000 a year. The second is 40 % and requires a reduction of at least 30 % in non-renewable primary energy consumption or reaching energy rating A or B, with a maximum base of €7,500 a year.
The third, at 60 %, applies to works that improve the efficiency of a whole predominantly residential building, with the same thresholds as the previous one. Its maximum base is €5,000 a year, but any excess can be deducted over the following four years up to a cumulative €15,000. The first two apply to works until 31 December 2022 and the 60 % one until 31 December 2023.
Requirements and exclusions
The deduction applies to the main home and also to other owned homes that are rented or waiting to be rented, provided the lease begins before 31 December 2023. An energy efficiency certificate proving the improvement is needed, and payments must be made by card, transfer, nominative cheque or deposit into an account: cash does not count.
Works in areas used for economic activity, garages, storage rooms, gardens, swimming pools and sports facilities are excluded. Subsidies, granted or yet to be granted, must be subtracted from the deduction base, and the same work cannot qualify for both the 20 % and the 40 % deduction. In addition, public aid for these works under several renovation royal decrees is not taxed in personal income tax.
What to review
Before starting a project, it is worth considering what level of improvement can be achieved and checking whether the prior and subsequent energy efficiency certificates can prove it. It is also advisable to keep quotes, invoices, proof of payment and technical documentation, because they are what will allow the deduction to be defended if the tax authorities review it. It should not be left until after the works, because the prior and subsequent certificates are the basis of the whole tax benefit.
In homeowners’ associations, the 60 % deduction requires coordinating a decision for the whole building and the common works. Anyone who also applies for subsidies must bear in mind how they combine with the deduction. As each case depends on the home, the works and the taxpayer, the right step is to consult a tax adviser before contracting.
An incentive with a deadline: planning the works in good time is what makes it possible to take advantage of it.
This article is general information. It is not legal, tax or investment advice, and it does not take anyone’s particular circumstances into account.
