After the sorrow of losing a family member, the paperwork involved in the inheritance process becomes a new difficult moment for the heir. Among the most frequently asked questions, heirs often wonder how to declare inheritance in the tax return.

How is inheritance taxed?

When inheriting the heir must pay tax. However, this may not affect the tax return to be submitted to the Spanish Tax Agency. Inheritance and Gift Tax is paid on assets according to national and regional law.

However, it is important to highlight that inheritance does affect tax return in the event that inherited assets generate proceeds taxable in tax return. Thus, if you received money in current accounts for example, the interests generated during the previous year must be specified in your income tax return.

How can I include an inherited property in the income tax return?

This is one of the most frequently asked questions by our clients. If you received a share or full ownership or life interest in a property you must state the relevant real estate proceeds in the tax return should the said property not be the usual residence. Full ownership is not taxable, but we must bear in mind the following in our tax details:

  • If the property was leased, rent proceeds must be declared.
  • If the property was sold, earned proceeds shall be declared.
  • In any case, it is important to take legal advice so as to determine the nature of the assets inherited and the taxation in case of property sale.

Taxation on the sale of inherited property

Only proceeds or equity gain derived from assets during the previous year shall be taxable for the time they are included in your equity. Inheritance per se is not subject to Income Tax, but to the Inheritance and Gift Tax.

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