The following are the tax incentives for energy efficiency improvements in homes. The high energy costs and the climate and supply problems derived from the use of fossil fuels have become one of the main problems faced by the States in recent times and with a view to the future. For this reason, many efforts are being made to reduce the consumption of these fuels and to replace them with clean and renewable energy sources.
These efforts, of course, include important tax incentives for improving the energy efficiency of homes. These have been introduced in recent times in the tax regulations to favor the energy transition. We will deal here with the incentives currently in force in the IRPF and IBI (Real Estate Tax) and that undoubtedly contribute to increase the attractiveness of this type of improvement actions for homeowners.
Tax incentives for the energy efficiency improvements in homes
They come mainly in two ways, the IRPF and the IBI.
Tax incentives in the IRPF for energy efficiency improvements
At the IRPF level, the tax regulations have introduced interesting deductions for carrying out works to improve the energy efficiency in homes. Establishing two levels of deduction to be applied in the tax return of the owner of the property. Increasing the amount of the deduction the greater the impact of the improvement in efficiency of the work carried out.
As common requirements to fulfill for the application of the deductions, we would have those that we explain next.
Common requirements for personal income tax deductions
Firstly, the deductions to be applied in relation to the amounts paid for this type of works, between October 6, 2021 and December 31, 2022.
Also, the dwelling in which the works are carried out must be the habitual residence of the owner. Or a dwelling that is rented for such use. Therefore, second residences or dwellings dedicated to rentals other than the use as a dwelling, such as tourist rentals, are excluded. However, the application of the deduction is allowed when the property is in the expectation of being rented, provided that in this case it is rented before December 31, 2023.
Another requirement is that a certificate of energetic efficiency of the house must have been issued prior to the beginning of the works. Or with a maximum age of two years. And with another one after its completion.
In addition, the amounts will have to be paid to those who carry out the works or issue the certificates by means of card, transfer, nominative check or deposit in bank account. In no case by cash payment. And the amounts that are subsidized will be discounted.
Finally, they do not give right to the deductions the works carried out in the parts of the housings affected to an economic activity. As well as parking spaces, storage rooms, gardens, parks, swimming pools and sports facilities and other similar elements. Those carried out in the parking spaces and storage rooms that, for having been acquired together with the habitual residence, are considered as part of the same one, are taken into account.
Deductions applicable to Personal Income Tax. IRPF
The two levels of deduction applicable by the owners for the works carried out in their homes are:
- Deduction of 20% of the amounts paid when the sum of the heating and cooling demand indicators of the energy efficiency certificate of the dwelling is reduced by at least 7%. The maximum base of the deduction will be 5,000€ per year, so the maximum deduction applicable would be 1,000€ in the income tax return.
- Deduction of 40% of the amounts paid when the non-renewable primary energy consumption indicator is reduced by at least 30%. Or, an improvement of the energy rating of the dwelling is achieved to obtain an energy class “A” or “B”, in the same rating scale. The maximum base of the deduction will be 7,500€ per year, so the maximum deduction applicable would be 3,000€ in the income tax return.
How are these deductions
These deductions will be applied in the year in which the energy efficiency certificate is obtained after the completion of the works. That in any case must be obtained before January 1, 2023.
It should also be noted that these two levels of deduction are incompatible with each other, i.e. it is not possible to apply both deductions at the same time.
Finally, it should be noted that there is also a deduction for homeowners made by the community of owners in buildings of mainly residential use, for the energy rehabilitation works carried out in the building. The deduction will be 60% of the amounts paid between October 6, 2021 and December 31, 2023. Therefore, it covers one year more than the deductions mentioned above.
They entitle to the deduction of the works by which a reduction in the consumption of non-renewable primary energy is achieved. Referring to the energy certification of the building, of at least 30%. Or, the improvement of the energy rating of the building to obtain an energy class “A” or “B”, in the same rating scale, with respect to the one issued before the beginning of the works. The maximum base of the deduction will be 5,000€ per year, so the deduction may reach up to 3,000€ per year. It will be applied in the year in which the energy efficiency certificate of the building is obtained after the works that accredits the above mentioned, which in any case must be obtained before January 1, 2024. As in the deductions analyzed above, it is not applicable to the part of the dwellings affected to economic activities.
IBI tax incentives for the energy efficiency improvements
It is not only in the area of Personal Income Tax that we can speak of tax incentives for the energy efficiency of dwellings. In recent years, incentives of this type have also been introduced in the area of IBI. However, there are significant differences between municipalities. In this regard, it is worth remembering that IBI is a municipal tax but it is basically regulated at the state level. Therefore, what the common state regulation does is to enable the City Councils to introduce certain incentives in their Tax Ordinances. It is up to the City Councils to adopt them or not.
Thus, the state regulation, Texto Refundido de la Ley Reguladora de las Haciendas Locales (Revised Text of the Regulatory Law of Local Treasuries), foresees two possible incentives that the Local Councils may, optionally, adopt:
- A rebate of up to 50% for properties in which systems for the thermal or electrical use of solar energy have been installed.
- A rebate of up to 50% for properties in which electric vehicle recharging points have been installed.
As mentioned above, the effective application of these allowances depends on whether or not they are adopted in the Tax Ordinances of each City Council.
Example
By way of example, we will cite the Tax Ordinance regulating IBI of the Madrid City Council. This has introduced bonuses for properties with solar energy systems. Thus, the following allowances are established in the city of Madrid:
- Properties not subject to the horizontal property regime, whether or not they are dwellings. Bonus of 50%. When this type of systems have been installed for self-consumption. Applicable during the three tax periods following the completion of the installation. The installation must have a municipal license. And in the case of installations for the production of heat, they must include collectors that have the corresponding approval by the competent Administration. The amount of the annual bonus cannot exceed, for each year, 50% of the cost of the material execution of the installation.
- Properties subject to the horizontal property regime. Allowance of 50%. Applicable to apartments and premises in buildings that carry out a shared installation to supply energy to all or some of them. Applicable during the three tax periods following the completion of the installation, complying with the license and collector requirements indicated above. Only the apartments and premises linked to the installation will be eligible for the rebate. And the total amount of the rebate each year may not exceed, for each fiscal year, 50% of the cost of the material execution of the installation that would have been passed on to each owner.
In any case, both for properties subject to the horizontal property regime and those that are not, the total amount of the rebate in the three years in which it is applicable may not exceed 95% of the cost of the material execution of the installation. For its application, the rebate must be expressly requested to the City Council. And it will take effect, if applicable, from the tax period following the one in which it is requested.