When someone reaches 65, it's common for them to start reassessing their financial and asset situation. Many older people own more than one home: their primary residence and a second home. intended for rental, holiday enjoyment or simply as an investment.
In this context, a very common question arises: what taxes does a person over 65 pay when selling a second home? There is a belief that, from this age onwards, all property sales are exempt from taxation. However, this is not exactly the case. Spanish tax regulations clearly distinguish between primary residences and second homes, and That difference is key to knowing which taxes apply..
In this guide we explain it to you in a clear, practical and up-to-date way What happens when selling a second home When the owner is 65 years of age or older, what taxes affect the transaction and what alternatives exist before selling?
Is there a tax exemption for selling a second home after the age of 65?
The short answer is: no, except in very specific cases. People over 65 enjoy a well-known tax exemption: they don't pay tax on the capital gain obtained from the sale of their primary residence. In other words, if a person sells their primary residence after turning 65, You do not have to pay income tax on the capital gain generated.
However, this benefit does not automatically apply to second homes. If what is being sold is a second home (for example, a beach house, a country house, or a rental property), the full exemption does not apply. In that case, the transaction may indeed generate taxes.
It is essential to understand that the Treasury only considers the full exemption when it comes to the main residence of the taxpayer at the time of the sale. Therefore, even if the owner is 65 years of age or older, the sale of a second home is usually taxable.
Difference between main residence and second home for tax purposes
To fully understand what taxes are paid on the sale, it is essential distinguish between primary residence and second homeFor tax purposes, a primary residence is considered to be one that meets two conditions.
First, it must be the taxpayer's main residence. In addition, it is also taken into account whether it has been effectively and permanently inhabited for at least three years (except in justified cases). If a 65-year-old sells their main residence, The potential capital gain is exempt from personal income tax..
On the other hand, the second home refers to any property that does not meet the above requirements. It may be:
- A house of vacation.
- a property inherited.
- A property intended for rental.
- A home that It is no longer the main residence.
In these cases, even if the owner is 65 years old, the sale can still take place. may generate a capital gain subject to taxationThis difference is crucial, as it directly affects the taxes that older people will have to pay.
Taxes paid by someone over 65 when selling a second home
When selling a second home, people over 65 should primarily consider two types of taxes.
Capital gain in personal income tax
The most relevant tax in the sale of a second home is the Personal income tax on capital gainsHowever, what is capital gain? This concept refers to the difference between:
- The acquisition value (purchase price) additional expenses and investments made).
- The transfer value (sale price) less associated costs).
If the sale price is higher than the purchase price, there is a profit. That capital gain taxed under the savings income tax baseTax rates are progressive and depend on the amount of profit.
As we have already mentioned, it is important to emphasize that, unlike what happens with the main residence, in the second home There is no automatic exemption for being 65 years old.
However, there is a possible alternative: if the senior citizen reinvests the proceeds in a life annuity (within certain limits), they could benefit from a partial or full exemption from capital gains tax. In this regard, exploring suitable financial solutions is key to optimizing sales taxation.
Municipal capital gain
The municipal capital gains tax is another tax that affects the sale of a second home. Its technical name is the Tax on the Increase in the Value of Urban Land (IIVTNU).
This tax levies the increase in land value from the time the property was acquired until the sale takes placeIt is managed by the corresponding city council and is calculated based on:
- El cadastral value of the land.
- Number years since purchase.
Even if the owner is elderly, the municipal capital gains tax is still generated on the sale of a second home, unless it can be proven that There has been no real increase in valueIt is a common misconception that people over 65 are exempt from this tax: this is not the case for second homes.
Other expenses associated with the sale
In addition to taxes, selling a second home may involve other costs:
- Expenses of notary.
- Property registration.
- Real estate fees.
- Cancellation of charges If they existed: although they are not taxes as such, they directly influence the final benefit obtained by the elderly after the operation.
Is there any way to reduce taxation?
Although selling a second home after the age of 65 is not completely exempt, there are exceptions. Legal strategies that can help reduce the tax burden.
One of these options is to establish a life annuity with the amount obtained, which can allow avoid paying taxes on capital gains up to a certain limitAnother possibility is to properly plan the timing of the sale, taking into account the acquisition values and possible deductible expenses that reduce the profit.
Alternatives to selling a second home for people over 65
Before deciding to sell a second home permanently, many older people consider alternatives that allow them to obtain liquidity without completely losing their ownership or without assuming a heavy tax burden. Among the most interesting options are:
Sale of the bare ownership
This is an increasingly popular option for people over 65. In this model, the person transfers ownership of the property but retains the life usufruct, meaning they retain the right to use and enjoy the property for life. right to continue using the home until their deathThis allows you to obtain immediate liquidity without leaving home.
At Even More Life we are experts en sale of the bare propertyWe help elderly people to transform your real estate assets into economic resources without giving up the use of your home primary or secondary residence.
Real estate annuity
Another interesting option for seniors is a lifetime real estate annuity. Instead of receiving the entire amount in a single payment after the sale, The owner receives a monthly income for life.This can have tax advantages and provide economic stability over the next few years.
At Aun Más Vida we provide assistance both in selling bare ownership and in formalizing a real estate annuity tailored to the needs of our clients, studying each case individually.
Reverse mortgage
La reverse mortgage It is another alternative designed for people over 65 years of age.
Allows to obtain regular income using the property as collateralwithout the need to sell. The owner retains ownership and can continue living in their home. This is a particularly attractive solution for primary residences, although it can also be considered in certain situations with second homes.
In summary, it is worth highlighting one last time that selling a second home when you are 65 years of age or older It is not exempt from taxes, unlike the main residence.Older people should mainly consider two factors:
- La capital gain in personal income tax.
- La Municipal capital gain.
Therefore, before finalizing the sale, it is advisable to analyze the specific situation, calculate the potential profit, and consider alternatives such as sale of bare ownership, real estate life annuity or reverse mortgageEach case is different, and good planning can make a big difference in the tax burden and quality of life over the next few years.
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