The depreciation that comes off even if you never deducted it

There is one line in the gain calculation that catches everyone off guard: the acquisition value is reduced by the depreciation, and the law requires the minimum depreciation to be counted even if the taxpayer never deducted it. Put another way: a flat that was let reaches the sale with a tax purchase value lower than the price paid for it, and so produces a larger gain. It is not a penalty for having let the property, and it is not an adviser's mistake. It is how the rule is built, and it is worth understanding before signing the sale, not when the tax office's request arrives.

What the rule says exactly

The Spanish personal income tax Act (IRPF), when it defines the acquisition value of real estate, orders it to be reduced by the depreciation. And the IRPF Regulations spell out the decisive point: the minimum depreciation shall be counted in every case, regardless of whether it was actually treated as a cost, the minimum depreciation being the one resulting from the maximum depreciation period or the fixed percentage that applies in each case.

The practical consequence is uncomfortable but clear: not declaring the rent does not avoid the depreciation. On this particular point, someone who declared and deducted the depreciation is in the same position as someone who declared nothing; the difference is that the first used the cost at the time and the second did not.

What it is calculated on: land is not depreciated

The depreciation of a let property is not calculated on the full purchase price. It is calculated on the value of the building, always excluding the value of the land, and using as the base the higher of two amounts: the acquisition cost paid or the valor catastral (the official value the land registry for tax purposes assigns), in both cases leaving out the land. The annual percentage is set by the IRPF Regulations for let properties (3 % today), and it is a figure worth checking in the wording in force for the year being declared, because it is the kind of number a reform can change.

The share of the land comes from the IBI bill (the annual municipal property tax), which splits the valor catastral into land value and building value. That same split governs the plusvalía municipal, the town hall's tax on the increase in land value, under the actual-gain method, which is why the IBI bill ends up being the most useful paper in the whole folder; it is explained in the guide on the land value.

Figure	Example (€)
Purchase price, with costs and taxes	210,000
Total valor catastral	96,000
Valor catastral of the land	33,600 (35 %)
Valor catastral of the building	62,400 (65 %)
Depreciation base: 65 % of 210,000	136,500
Annual depreciation	4,095

The base is 65 % of the cost because that is the weight the Catastro gives to the building, and because the acquisition cost here is higher than the valor catastral. Had the valor catastral of the building been higher than the cost, it would have been the base.

Years count in days, not tax years

Depreciation is counted for the time the property was let, apportioned when the letting does not cover the whole year. A flat let from 1 May to 31 December depreciates for those 245 days, not twelve months. And the periods when the property stood empty do not depreciate: they generate imputed property income, which is something else and has its own form. The apportionment follows the same logic as the one for rental costs, explained in the guide on apportioning by days.

Year	Situation	Days let	Depreciation counted (€)
2019	Empty until May, let afterwards	245	2,749
2020	Let all year	366	4,095
2021	Let all year	365	4,095
2022	Let until September	273	3,063
2023	Empty	0	0
2024	Let all year	366	4,095
Total reducing the acquisition value			18,097

Eighteen thousand euros less acquisition value is eighteen thousand euros more gain. At 19 % that is some 3,400 euros of tax. It is one of the biggest items in the whole return and it appears in no deed: it has to be rebuilt year by year.

Improvements are depreciated too

Work classified as an improvement becomes part of the property's value and, if the property was let after it was done, it is depreciated on its own timetable from the date it was carried out. On the sale, the improvement adds to the acquisition value and its depreciation comes off, just like that of the original building. It is the logical end point of the distinction explained in the guide on improvement or repair: what was a repair was already deducted as a cost at the time; what was an improvement is recovered on the sale, but reduced by the wear attributed to it while the property was let.

How it is rebuilt when there are no papers

The typical scenario is someone who let their flat for six years, left the country, declared some years and not others, and today has kept nothing. The reconstruction goes like this:

• The returns that were filed. Each Modelo 210 for rental income carries the amount of costs deducted. They can be retrieved from the Agencia Tributaria's online office.
• The tenancy agreements and the deposits lodged. Deposits on urban tenancies are lodged with the relevant regional body, and that deposit leaves a start and end date.
• The IBI bill for each year, which gives the valor catastral and its split for each year. The valor catastral changes over time, so the depreciation base for 2014 need not be the one for 2024.
• Bank statements showing the monthly rent coming in, which mark out the real periods of occupation better than memory does.

With that, a year-by-year table is drawn up and the accumulated depreciation is calculated. It is not elegant work, but it is what supports the figure if anyone asks.

Questions that always come up

Question	Answer
I never declared the rent, so do I escape the depreciation?	No. The rule counts it in every case. Besides, undeclared years stay open until the limitation period runs out, and a sale is a good moment for them to surface.
I only let it for one summer season	That period is counted, apportioned by days. Seasonal or holiday letting depreciates in the same way while the property is let out.
I let a relative use it for free	There is no tenancy, so no deductible depreciation. There are, however, specific valuation rules worth looking at.
What if the accumulated depreciation exceeds the value of the building?	That is the scenario of properties let for decades, and at that point it has to be studied on the detail of the case: it is not a calculation that can be dealt with by a general rule.
I sold at a loss on paper; can I still have a taxable gain?	Yes, and it happens. If the accumulated depreciation is high, the tax acquisition value drops enough for a sale below the purchase price to produce a taxable gain.

That last row is the reason this guide exists. Someone who sells for less than they paid assumes there is no tax, does not file Modelo 210 and, two years later, receives an assessment they do not understand. The calculation always has to be done, even when the apparent result is a loss.

What we do with this

We rebuild the letting history from whatever exists, calculate the depreciation year by year on the correct base for each year, and leave the table documented in the sale file, which is what gets shown if there is a check. When the history has gaps, we say so and explain the risk each one opens: there is a difference between a figure supported by returns that were filed and a figure estimated from bank statements, and the client is entitled to know which of the two they are in. If you would like us to look at it, tell us about the transaction in the property sale intake form, and if there are also years of letting left undeclared, it makes sense to look at both fronts together rather than settling one and leaving the other open.

Questions that come up with “The depreciation that comes off even if you never deducted…”

• Selling at a loss: do I still have to file?
• Which costs can I add to the purchase value?
• I let the flat: does that count against me when I sell?
• I renovated the flat: does that add to the purchase value?
• Can a non-resident use the reinvestment exemption?

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