New TEAC Criterion: Can You Claim an IRPF Deduction for a Mortgage Cancelled After Selling Your Main Residence?
The IRPF deduction for a mortgage cancelled following the sale of a main residence has recently been clarified through a new ruling issued by the TEAC (Spanish Central Economic-Administrative Court). This decision provides important guidance on how this tax relief should be applied in certain property transactions and affects taxpayers who sold a property with an outstanding mortgage balance.
The new ruling (Resolution 2995/2025, dated 20 October 2025) confirms that the deduction may be applied, provided that the property was purchased before 1 January 2013 and the taxpayer qualified for the transitional tax relief regime for investment in a main residence.The ruling mainly establishes the following principles:
- Mortgage Cancellation Using the Sale Proceeds Is Deductible for IRPF Purposes
Until now, the Spanish Tax Agency generally accepted deductions only for mortgage instalments paid before the sale of the property, excluding the final repayment of the mortgage, which is often the largest amount. The previous interpretation considered that the funds obtained from the sale could not form part of the tax deduction base for investment in a main residence.
- The Origin of the Funds Does Not Affect the Deduction
According to the TEAC, what matters is not where the money comes from, but how it is used. If the sale proceeds are used to repay the mortgage linked to the taxpayer’s main residence, the amount may qualify for relief under the transitional deduction regime.
Requirements to Apply the IRPF Deduction After Selling a Property
To benefit from this more favourable interpretation, the following conditions must be met:
- The property must have been acquired before 1 January 2013. The deduction only applies to taxpayers who already benefited from the relief before it was abolished.
- The taxpayer must have claimed the deduction in previous tax years. Spanish tax regulations require continuity in the application of the deduction.
- The property sold must have qualified as the taxpayer’s main residence according to IRPF rules.
Limits and Amounts of the Mortgage Deduction
- Maximum annual deductible base: €9,040
- Deduction percentage: 15% (7.5% state relief and 7.5% regional relief)
- Maximum annual tax saving per taxpayer: €1,356
Amending Previous IRPF Tax Returns: Recovering Unclaimed Deductions
Can You Recover Tax From Previous Years?Yes. The ruling allows taxpayers to amend non-time-barred IRPF tax returns in order to claim deductions that were not previously applied.
If you sold your main residence in recent years, purchased it before 2013, and used part of the sale proceeds to repay the mortgage, there is a strong possibility that you may be entitled to reclaim part of your taxes.
Conclusion: An Opportunity to Reduce Your IRPF Liability
The TEAC ruling represents a significant tax advantage for thousands of taxpayers in Spain. Mortgage repayments made using the proceeds from the sale of a main residence may now be fully deductible, provided the requirements of the transitional regime are met.
At G&R Asesores, we recommend:
- Checking whether your property was acquired before 2013
- Confirming whether the sale proceeds were used to repay the mortgage
- Reviewing whether previous IRPF tax returns can be amended
- Seeking professional advice to prepare and submit the required documentation
If you believe this ruling may apply to your situation, we can help you assess your case and recover the tax relief you may be entitled to.
Contact us today for personalised advice with no obligation.
