The ownership of a home is fundamental in the calculation of the tax obligations that we must face. If you are considering buying a property to pass it on to your children, it is important to carefully study the implications of choosing the person who will be the owner from the first moment.
If you are considering purchasing a home to pass it on to your children, it is important to previously study its ownership. One of the most common doubts is understanding what is more profitable in fiscal terms, since we can choose between putting it in our name, that of our children, or opting for the route of joint ownership.
Depending on our choice, the taxes and associated processes to it vary considerably. Although there is no single formula that is better than another, since different aspects influence decision-making, below we will tell you some general concepts that we should take into account.
The simplest thing: put the home in your child’s name
The easiest way for those who do not want complications is to buy the home and Put it in your son’s name. The process is very simple and has the main advantage that we will not have to assume no tax burden a posteriori as a donation or inheritance. In exchange, we must consider that the person who receives the house must face a series of tax obligations, like any other owner of a property, such as the Property Transfer Tax and the typical expenses of purchasing a home, such as the notary office, for example.
If we opt for the donation, a route that is often taken into account in this type of situation, the process will be subject to the Donation Tax. Depending on the autonomous community of residence, the economic impact may or may not be greater, since in some communities there are certain bonuses that are very interesting and that can cushion this expense, but this is not always the case. If there is a capital gain, the transaction should also be declared in the personal income tax and the corresponding municipal capital gain paid.
An alternative to all of the above consists of acquiring usufruct and bare ownership. With this tool, the parents are the owners of the home until their death, at which time ownership passes to the child. This route is very advantageous in fiscal terms, since you do not have to pay any tax as a donation. The main drawback is that all parties must agree if it is decided to sell the home before the death of the parents.
The inheritance option
So far, we have explored the three forms that exist when everyone involved is alive. Ultimately, we cannot forget to evaluate the option of housing inheritance, one of the most traditional alternatives to all those we have mentioned so far. In fiscal terms, we must consider that this route requires Inheritance Tax, the cost of which varies depending on the autonomous community of residence.
As we have seen, there are several options that we have at our disposal when we find ourselves faced with this situation. There is no option that is better than another, it will depend on many elements, such as the place of residence or our own particular needs, but it is always good to know all the ways that exist to make a decision with all the information available.
