Despite being something that people do every year, it is very common that some doubts arise when keeping up with the IRS – among them, one of the most frequent is about how to declare the financing in the Income Tax.
The first step in making your declaration is to understand that the amount to be considered must refer to what was spent or received during the current year, regardless of the total purchase or sale value of the asset.
If done in this way, when selling this acquired asset, the taxpayer will have his declared profit reduced, resulting in a lower amount to be paid of Income Tax, with the title of capital gain.
Do you want a step by step of what is necessary to declare a mortgage and clarify the main doubts on the topic? So read on and check it out!
What are the means to buy a property with financing?
Choosing among the properties visited can be difficult. Some have extra features and some do not. But, once the decision is made, another point also deserves the buyer’s attention.
This is the financing process. It can be done in banks, financiers, real estate companies and, in some cases, with the construction company responsible for the project.
Comparing these options, the process carried out at the real estate company tends to generate a more reliable shopping experience.
This is because the real estate broker has already followed the previous steps, is familiar with the buyer’s interests, in addition to dominating the real estate market and the procedures that involve the transfer of assets.
They mediate the process with consolidated financial institutions, that is, they are able to guarantee good financing conditions and, at the same time, ensure the success of all stages of the purchase.
What value of the property must be declared in the Income Tax?
The amounts to be informed in the income tax return for financed properties must be detailed. To avoid future problems, it is necessary to correctly inform all the amounts that are paid. You must enter how much has been paid and how much has already been paid.
Thus, all amounts that have already been paid in the course of the year will be informed in the declaration. They must be updated in the following situations:
at the turn of the year – the income tax return must be updated at the beginning of the year, this also applies to the information on financing and interest that must be mentioned;
sale – if the person realizes the sale of the financed property, he must inform how much he had already paid and also the price of the sale of the property;
financial ballast – everything a person buys and spends must have a financial ballast (this ballast must match the declared annual budget, given that the IRS needs to know where the money that was used to pay for the good that came from came from acquired by the citizen).
How to declare each type of real estate income?
The different types of real estate income must be declared in the Income Tax, and each of them has specific procedures. See below how the declaration of each property should be!
In financed properties like capital smart city Islamabad, the amount to be declared is only that paid in installments in the previous year. The total value of the property should not be informed, as it is not yet settled and does not belong entirely to the future owner, but to the bank or financial institution. As soon as the property is fully paid, its value must be posted.
In the “Goods and Rights” section of the Income Tax declaration, the goods sold must be mentioned. In the annex “capital gain”, some data must be informed. Are they:
- full name of the person who purchased the property;
- date on which the deal was closed;
- amount paid for the property;
- Income Tax amount at the time of sale.
After informing all these data, you can rest assured, since all information regarding the property sold will be registered in accordance with legal requirements.
The declaration of the property received as inheritance is very simple – it must also be made in the field “Goods and Rights”. As soon as this stage is completed, the declarant must fill out the form “Exempt and Non-Taxable Income”, in which he will inform code 14 in the option “Property transfers: donations and inheritance”.
In this topic, you must inform the CPF number of the relative who died and the value of the percentage inherited from the property. If the property is in inventory, the amounts referring to it cannot be posted until its completion. In the meantime, it is necessary to indicate the estate and the inventory.
The rental statement is different for the owner and the lessee. If the person owns the rented property, he must mention the amount received from the tenant during the year. Other values, such as property tax and condominium, should also be mentioned.
Tenants must declare informing the landlord’s CPF and the total amount they paid for rent during the period. Extra expenses with the property should not be informed, as they will already be mentioned in the declaration of the owner.
What are the ways to declare a property?
Including real estate in the income tax returns is as simple as in the case of motor vehicles. The form is the same used in both cases, that is, “Goods and Rights”. Lines 11 and 12 ensure that the taxpayer determines whether the property is a house or an apartment.
Then, you will be asked for additional information about the property – and the more detailed, the better: name of the seller, date of acquisition, which is the registration number and much more. Information will also be requested on the amount paid for the acquisition, the payment method adopted and the discharge process in previous years.
Do you want to understand the process in detail? In the following step by step you will find more information.
How to declare your real estate financing?
Before reporting the acquisition of a property to the IRS, it is important to understand that the way the declaration is made varies according to the way the payment was made.
Therefore, the declaration of the purchase of a property in cash is made in a different way from the one made to declare a financed acquisition, for example.
Another very common question of the taxpayer is the time to answer about the value of the property since many believe that the price to be charged for the sale of the property must be informed.
However, the correct way to complete this field is to inform the Revenue of the amount that has been paid so far, including interest.
The form that must be filled out to indicate that the purchase of the property has been financed also causes a great deal of confusion. A common mistake is filling in the form “Debts and liens” when the correct thing would be to use the field “Discrimination” that appears in the property’s own form.
To make the declaration you must follow a few steps. Look.
In the form “Goods and Rights”, you must inform what type of property you have. To do this, within the “Code” line, you will select 11, if you have an apartment or 12 for a house.
In the line “Discrimination” you must enter all the data about the property, such as address and who was the seller – in addition to the name, it is necessary to add the CPF or CNPJ.
The form in which the payment was made must also be communicated. Identifying the bank that provided the loan, the conditions under which the financing was contracted, the amount from own resources, the donations received and how much was withdrawn from the FGTS.
The next step is based on declaring how much has already been paid for the property by the year 2019. For this, the field “Situation on 12/31/2019” is used.
In this field, it must be filled in with the amount that was declared in the 2018 Income Tax.
If the acquisition of the property was carried out during 2019, it is necessary to leave this space blank, after all, in the previous year it was not included in the Income Tax Declaration.
Then, it will be necessary to inform how much has already been paid in installments of the financing by the end of 2019. In this case, the field “Situation on 12/31/2019” must be completed.
To find this value, just add to the amount of the field “Situation on 12/31/2018” the amount that was paid during 2019.
To exemplify: we assume that by the end of 2018 you have paid off R $ 120 thousand of your financing. If in 2019 you paid another R $ 24 thousand, the situation at the end of that year will be R $ 144 thousand.
At that time, you must move to the “Exempt and Non-Taxable Income” form.
It is very common for people to use part of their FGTS to make the purchase of a property. If you fall into this situation, it is necessary to declare that part of the resource comes from the Guarantee Fund.
Therefore, you must use line 3 – Indemnities for termination of employment contract – to inform the IRS that part of the resources used came from FGTS.
It is also not a rare situation to have relatives assisting in the acquisition of a property. In this case, to justify the origin of the funds, it is necessary to use line 10 – Asset transfers, donations and inheritances – to declare that you have received a donation.
Which taxpayers are required to submit the Annual Statement of Adjustments?
Taxpayers who until December 31 had the possession or ownership of goods with a total value of more than R $ 300 thousand must submit the Annual Statement of Adjustments.
Buyers who have entered into private contracts, also called drawer agreements, follow the same obligation and need to declare their acquisition.
Spouses who do not have the property declared in the property and rights file need to include such a situation in the “Discrimination” field.
For this, it is necessary to use code 99, reporting that the property is already included in your spouse’s Income Tax Return. The CPF number of the husband or wife needs to be reported in this case.
What is the amount to be declared to the IRS?
If you are still paying off your mortgage, it is necessary to inform only what was paid for the property up to the time of the declaration. In this case, it is necessary to add brokerage costs, taxes related to the transfer of the asset and interest.
When declaring all the value invested in the property, the taxpayer will be favored at the moment he realizes the sale of the property. This is due to the fact that a 15% tax is charged on the profit obtained since the value of the income is calculated between the difference between the amount charged for the sale and the amount declared to the government.
It is also common to have doubts about the need to declare the market value that the property has. However, as already explained, it is necessary to inform only how much has already been invested in the property, since the real price will be corrected only when a sale occurs.
Should renovations to the property also be declared?
The reforms must also be declared in the “Goods and Rights” tab in the “Improvements” option. It is located on line 17 and needs to contain the details of what was accomplished, the amounts spent, as well as the respective payment receipts.
It is important to note that, in this case, in addition to the labor required for the execution, the materials used and the purchase notes also need to be correctly informed.
One of the duties of any citizen is to be up to date with their taxes, however, so that there are no penalties in case of error, it is essential to have good knowledge on how to declare the Income Tax and make the legal adjustments.
In addition to the requirement, there are also some benefits, such as the fidelity of the purchase price information and the future value that may eventually be charged on the sale. After all, the profit is taxable.
The purchase of a property can be an unusual situation and, so that it is not the reason for the taxpayer to fall into the fine mesh, it is necessary to understand all these points and declare the financing in the Income Tax correctly. So, stay tuned to all the information cited in this post!