How much tax relief can you get on the sale of your house? How to deduct agency fees?
The real estate commission refers to the fees that an agency charges for managing the sale and purchase of a property: attracting clients, promoting the property, carrying out visits, etc. Those who have sold their home with the services of a real estate agency may wonder whether the real estate commission is tax deductible for personal income tax purposes.
How much commission is paid to an estate agent?
The answer is that it depends on several factors and the type of agency. For example, online real estate agencies charge less than physical agencies and usually offer services for a fixed price. You can find such agencies that charge 1,000, 2,000 or 3,000 euros.
On the other hand, physical real estate agencies usually charge a percentage of the final sale price, the most common being 5%, although some offer their services for 3%. In the luxury real estate sector, it is common for estate agents to charge 7%.
Is the estate agent’s commission tax deductible?
Yes, you can deduct the real estate commission on the sale of a property. To deduct it for personal income tax purposes, you will have to ask for the invoice from the estate agent who handled the transaction.
Some estate agents offer to charge less fees or not to charge VAT if you do not provide an invoice. This is illegal and will prevent you from being able to deduct the commission.
How to deduct the agency commission from the tax authorities?
The first thing you should do is calculate the capital gain obtained from the sale of the property. To do this, you must take into account the value for which you bought the house and the price for which you sold it. From the latter value you can subtract the real estate commission and all the expenses you had to pay for the sale: municipal capital gains, notary’s office, registry, agency…
By adding all these expenses, the transfer value will decrease, which will affect the difference between the purchase value and the sale value. The formulas to find these values are:
Acquisition value: purchase price + investments and improvements + expenses associated with the purchase – depreciation.
Transfer value: sale price – expenses and taxes.
Capital gain: transfer value – acquisition value.
The tax rate applicable to the result obtained varies between 19% and 23%.
What happens if the capital gain is negative?
If the capital gain is negative, you will not have to pay income tax or municipal capital gains. However, you will have to include the sale in the tax return in boxes 1631, 1632 and 1633.
What expenses can be deducted on the sale of a property?
When selling a property, certain expenses can be deductible in the IRPF, which allows you to reduce the taxable base of the capital gain obtained. These expenses are divided into two main categories: those that are deducted from the transfer value and those that increase the acquisition value.
With regard to the transfer value, expenses such as the real estate commission can be deducted, provided that an invoice is available, the municipal capital gain, and the expenses associated with the cancellation of the mortgage.
On the other hand, the acquisition value can be increased by deducting the costs of reforms and improvements made to the property, taxes paid at the time of purchase, such as Transfer Tax (ITP) or VAT, and notary and estate agency fees paid at the time.
In which box should I declare the commission and the sale of a flat?
The sale of a house, which generates a capital gain or loss, must be declared on page 15 of the income tax return. In box 1817, you must indicate the type of asset, specifying that it is a house. Then, the cadastral reference is added in boxes 1819 to 1821. Depending on the type of operation, box 1822 is marked if it is an onerous transfer (such as a sale or exchange) or box 1823 if it is free of charge (such as a donation). Finally, the transfer value should be entered in box 1826 and the acquisition value in box 1830.
Is the real estate commission on a rental property tax-deductible?
If you are a landlord, you can deduct the full amount of the estate agent’s commission that you paid when you signed a rental agreement. This expense, which usually amounts to one month’s rent or 10% of the annual rent, is not regulated by law and is fully deductible. You have a period of three years from the end of the real estate services to include it in your tax return, as long as the property is listed as the tenant’s sole residence.