Personal income tax deduction for renewables energies or energy efficiency

It is possible to apply a personal income tax deduction for investment in photovoltaic energy. This is another tax incentive that supports the development of the photovoltaic self-consumption sector. 

According to Law 10/2022, of June 14, on urgent measures to promote the building renovation activity in the context of the Plan de Recuperación, Transformación y Resiliencia, people who renovate their homes will be able to deduct up to 60% of their personal income tax (IRPF). These deductions are financed with European funds destined to housing rehabilitation and urban regeneration. 

Among the most relevant aspects of this law, we highlight: 

Who can take advantage from the IRPF deduction for installing solar panels? 

All the physical people that perfom works from their own dwelling or collective installations of owners building that contribute to imprive energy efficiency. 

 

IRPF deduction types for installing solar panels: 

The Real Decreto-ley 19/2021 (RD) establishes 3 types of IRPF deduction (Law 35/2006) for the execution of energy improvement works:

> DEDUCTION OF THE 20% OF THE INVESTMENT:

This case will NOT apply to photovoltaic installations. Heating and cooling demand can only be reduced by improving the building envelope (windows and insulation).

Deadline to access the deduction:

  • You have to perform works between october 6th and december 31, 2022. 
  • For a renting home, it will have to be rented before decembre 31, 2023. 

The maximum deduction are 5.000€ per year. To deduct this amount, you must demonstrate that the work has achieved a reduction of at least 7% in heating and cooling demand.

  • And how do you prove it? Through the indicators of the energy efficiency certificate of the house, which must be issued by the technician once the works have been completed.

> DEDUCTION OF THE 40% OF THE INVESTMENT: 

If you perform energy improvements in your dwelling or in a one to be rented, you can improve the IRPF deduction up to a 40%. To do this: 

  • You must demonstrate, through the corresponding certification, that you have managed to reduce at least 30% of non-renewable primary energy consumption.
  • If with the works you have managed to improve the energy rating of the house to obtain an energy class "A" or "B". 

Deadline to access the deduction:

  • You have to perform works between October 6th and December 31, 2022. 
  • For a renting home, it will have to be rented before December 31, 2023.

The maximum deduction are 7.500€ per month.  

> DEDUCTION OF THE 60% OF THE INVESTMENT:

If you perform rehabilitation works that improve energy efficiency in buildings of predominantly residential use:

  • You must accredit, by means of the energy efficiency certificate, a reduction in non-renewable primary energy consumption of at least 30%.
  • Another possibility is to improve the energy rating of the building to obtain an energy class "A" or "B".

Deadline to access the deduction:

  • The deadline for the completion of the works will be until December 31, 2023.
  • The deduction will be made in the tax periods 2021, 2022 and 2023, in relation to the amounts you have paid to each one.

The maximum deduction are 15.000€ per year.

 

Modification of the Horizontal Property Law 49/1960

It is established that the works for the improvement of the energy efficiency of the building or the works for the implementation of renewable energies for common use must be approved by simple majority as well as the application for aid and financing of these works.

 

Additional considerations

Creation of a line of guarantees for the partial coverage on behalf of the State of the financing of rehabilitation works that contribute to the improvement of energy efficiency. 

 

Which costs it can be deducted from IRPF?

YES. The following expenses necessary to carry out the work are deductible:

✔️ Professional fees.

✔️ Costs of drafting technical projects.

✔️ Construction management.

✔️ Cost of execution of works or installations. 

✔️ Investment in equipment and materials and other expenses necessary for development. 

✔️ Issuance of the corresponding energy efficiency certificates. 

 

NO. Are not deductible:

❌ Deductions shall not be applied when the work is done on affected parts of dwellings in an economic activity; to parking spaces, storage rooms, gardens, parks, swimming pools and sports facilities and other similar elements.

❌ Costs relating to the installation or replacement of equipment using fossil fuels shall not be included. 

 

How can it be applied?

IMPORTANT: ¡ENERGY CERTIFICATE!

To demonstrate that the improvements have achieved the energy savings mentioned above, two energy certificates must be completed:

1. First energy certificate must be completed, signed and processed prior to the photovoltaic performance.

2. Second energy certificate must be completed, signed and processed after the photovoltaic performance.

The first energy certificate must be valid for a maximum of 2 years before the start of the works. In other words, if the works are carried out in 2022, the energy certificate cannot be dated 2019.

 

But how is the energy certificate checked?

The energy certificates are made through a specific software and must be made by certified technicians.

In this software a drawing of the house is created detailing the constructive compositions of the house (wall thicknesses, insulation, ceilings, glazing, etc.) and also the facilities associated with producing hot water and air conditioning the house. 

Once the design has been validated in software, a non-renewable primary energy consumption is obtained. In this same model, the photovoltaic performance is then detailed and the software determines (through internal components) the associated savings. 

 

It is important to mention that the savings on which the rebate is applied is calculated automatically by the technician with the software. It does not refer in any case to the savings on electricity bills, nor is the information on the electricity consumption of the house used to prepare the energy certificate.

Therefore, it may be the case that depending on the origin of the systems used to heat and cool the house, and produce hot water, you get a saving or another:

  • It is not the same to calculate it in a house in which all systems are electric, than another that has a gas boiler with a solar thermal panel (in this case the savings can not be applied almost).

 

¿The IRPF deduction for installing photovoltaic panels is compatible with other subsidies?

YES! It is compatible with other measures and subsidies. This can be interesting if you want to access, for example, European aid for self-consumption and storage.


Do you want to install photovoltaic solar panells? Contact us HERE!

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