Tax advisors Aitor Fernández and Alina Dragos from TaxDown assert that inheriting a property is usually more tax advantageous than receiving it during life. The key lies in the so-called 'dead man's plusvalía', which avoids taxation on the property's appreciation.
The decision on how to transfer a property to children can have a significant tax impact. According to tax advisors Aitor Fernández and Alina Dragos from TaxDown, the most favourable option for most families is to wait for inheritance.
“Inheriting a property is usually better than receiving it during life,” the experts state after analysing hundreds of real cases. The main reason is the so-called “dead man's plusvalía”, a legal mechanism that eliminates taxation on the capital gains accumulated since the property was purchased.
When a person passes away, the appreciation of their property is not declared to the tax authorities. Heirs only pay the Inheritance Tax, which in many communities is exempted for parents and children. Thus, the plusvalía is practically exempt.
“Donating a property is always more burdensome than donating money. Often, it is a flat bought decades ago, and parents do not realise the tax bill that comes later,” warns Dragos.
Donating a property during life is treated for tax purposes as a sale. If the property is worth more today than when it was purchased, parents must declare that difference in their income tax, even if they have not received money in return. This can lead to a significant payment to the tax authorities.
However, there are exceptions. Donating cash for children to buy their first home can be advantageous in communities like Madrid, where an exemption of up to 250,000 euros is allowed. Extremadura also has bonuses for middle incomes.
Another favourable situation is when parents are over 65 years old and donate their habitual residence. In that case, the law exempts them from paying tax on capital gains, making the donation more attractive.
The experts insist that any transfer must be documented before a notary and notified to the tax authorities, even if the settlement is zero. “Not documenting” is the most expensive mistake, as the tax authorities monitor concealed donations.
For parents who want to help their children access a home, the general recommendation is to wait for the inheritance. But if the donation is cash or the age conditions are met, it can be a viable option. In any case, it is advisable to seek proper advice before deciding.
Timely tax planning can save thousands of euros. Each case is unique, and what works for one family may not be optimal for another. The important thing is to know the rules and act accordingly.
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