Using Your Home for Professional Work

Introduction

Did you know you can deduct part of your home expenses if you use a dedicated space for work? It's a great way to save on taxes, but, of course, it's not as simple as it sounds. Tax authorities love to scrutinize these deductions, so you’ll need to follow the rules carefully. Don’t worry—we’ll guide you through the process step by step.

What Does It Cover and How Does It Work?

If you have a room in your home exclusively used for work (and I emphasize "exclusively"—no guest beds or personal items allowed), you may deduct expenses such as rent, mortgage interest, and, if you own your home, even depreciation. However, each scenario comes with specific conditions:

• Rent: You’ll need a mixed-use lease agreement (residential and business). This type of contract requires your landlord to specify the professional portion and apply VAT to it. The issue? Many landlords prefer to avoid this added complexity.
• Mortgage Interest: Only the interest (not the principal) is deductible, and it must be proportional to the professional space.
• Depreciation: If you’re a homeowner, you can deduct the proportional amount corresponding to the depreciation of the part of your home used for professional purposes. Annual depreciation is generally calculated at 3% of the property’s acquisition or construction value (excluding the land value).

Key Requirements

1. Declare It to the Tax Authorities: When registering as self-employed, you must declare what percentage of your home is used for work (Form 036 or 037). Without this declaration, deductions cannot be applied.
2. The Space Must Be Exclusively for Work: If your home office has a bed or doubles as a storage room, it doesn’t qualify.
3. Mixed-Use Lease Agreement (If You Rent): Without this agreement, rent is not deductible.
4. Keep Proper Documentation: Retain all invoices, rental agreements, property deeds, and any other documents proving professional use.

Which Taxes Allow These Deductions?

Personal Income Tax (IRPF):

• You can deduct expenses like rent (if there’s a mixed-use lease), mortgage interest, and, if you’re a homeowner, the depreciation proportional to the professional space.

Value-Added Tax (VAT):

• Rent is only VAT-deductible if specified in a mixed-use lease agreement.

• Mortgage interest and depreciation are not subject to VAT.

Corporate Tax (IS):

• In general, expenses related to a primary residence are not deductible for companies unless the property is owned by the company.

Important Warning: Including your primary residence as part of a company’s assets can lead to significant tax and legal issues, such as imputing income for personal use. This option should be carefully evaluated and only applied in exceptional cases.

What Does the Tax Authority Say?

We contacted the Spanish Tax Authority (AEAT), and this was their response:

“You can partially deduct home expenses in proportion to the space used for professional activities, provided the exclusive use is proven and all documentation requirements are met. For rent, a mixed-use lease agreement specifying the professional portion subject to VAT is required. If you are a homeowner, you may deduct the annual depreciation proportional to the professional space declared.”

Our Experience

In our work with professionals and companies, we’ve seen the following:

• Mixed-use leases are rare: Many landlords avoid them due to VAT implications, leaving self-employed tenants unable to deduct rent.
• Depreciation is valuable for homeowners: Although not widely known, deducting proportional depreciation can make a significant difference in your IRPF declaration.
• Exclusive use is crucial: If your workspace doubles as a guest room or storage area, tax authorities are likely to reject your claim.

Conclusion

Deductions for professional use of your home are a valuable tax advantage, but they require compliance with specific rules, such as having a mixed-use lease for rent, exclusive use of the space, or accurately calculating depreciation if you’re a homeowner. Consult a tax advisor if you’re unsure how to proceed correctly.

👉 Do you know how to optimize your professional expenses? We love discussing this! Send us a message or contact us at hola@taxmentum.com (we’ll answer your questions for free ... we just want to meet you!).

👉 Are you a Tax Advisor or Business Consultant? Share your experiences with these types of expenses in the comments ... we love connecting with other professionals!



Important Note: This content is for informational purposes only and does not constitute tax, accounting, or legal advice. Every situation is unique, so we recommend consulting a lawyer or tax advisor before making decisions based on this information.