Personal Income Tax 2025 manual for people over 65

This guide summarises the personal income tax benefits specific to people over 65 in the 2025 return. The most important ones are: (1) full exemption of the capital gain on the sale of the habitual residence (no reinvestment required); (2) exemption of the capital gain on the sale of any asset if the proceeds are reinvested in an insured annuity up to €240,000 per taxpayer within 6 months (art. 38.3 LIRPF); (3) amounts received from a reverse mortgage on the habitual residence are not taxed under personal income tax (15th AP LIRPF); (4) personal minimum increased by €1,150 per year from age 65 (+€1,400 additional from age 75); (5) minimum for ascendants over 65 with annual income ≤ €8,000 (excluding exempt income). Public and private pensions are taxed as earned income, but some specific benefits (absolute permanent disability, severe disability) are exempt.

🔵 Main rule: Arts. 7, 17, 38.3, 56, 57, 59 and 61 of the Personal Income Tax Act; ninth and fifteenth additional provisions of the Personal Income Tax Act; article 42 and ninth additional provision of the Personal Income Tax Regulation; first additional provision of Act 41/2007.

Pensions and earned income in retirement

The benefits received by a retired person are taxed as earned income (Art. 17 Personal Income Tax Act). Among others:

• Pensions from public schemes of Social Security and Civil Servants Pension Scheme and other public benefits for disability, retirement, accident, illness or widowhood, that are not exempt.
• Benefits from mutual funds that are general compulsory for civil servants, orphan associations and similar entities.
• Pension plan benefits received by their beneficiaries.
• Benefits from welfare mutual insurance funds.
• Benefits from corporate welfare plans.
• Benefits from insured welfare plans.
• Long-term care insurance benefits under the Personal Autonomy Promotion Act.

🟡 Important: all these benefits are taxable, but some may enjoy specific reductions (for example, lump-sum benefits generated over more than two years). The treatment depends on the regime applicable to each item.

Common exempt income for seniors

Article 7 of the Personal Income Tax Act sets out several exemptions that especially affect this group:

💡 Practical shortcut: the 2025 IPREM is set at €8,400 (extension of the 2023 Budget Law). The 2 × IPREM and 3 × IPREM thresholds remain in force until new General State Budgets are approved.

Exemption on the sale of the habitual residence

When a person over 65 transfers their habitual residence, the capital gain is fully exempt from personal income tax, regardless of whether or not the proceeds are reinvested.

Requirements:

• The seller must have turned 65 by the transfer date.
• The transferred property must have been the taxpayer's habitual residence (continued residence for at least three years, except for statutory exceptions).

📌 No need to reinvest to qualify for this exemption: simply being over 65 + habitual residence is enough. The reinvestment in annuities (next section) covers a different scenario: the sale of any asset by persons over 65, not just the habitual residence.

Reinvestment of the proceeds in annuities

Capital gains obtained by persons over 65 from the transfer of any asset (shares, funds, second homes…) may be exempt if the entire proceeds are used, within 6 months, to set up an insured annuity in favour of the taxpayer.

• Maximum reinvestable amount: €240,000 per taxpayer (not per transaction).
• Partial reinvestment: if the reinvested amount is less than the total received, only the proportional part of the gain is exempt.
• Annuity frequency: equal to or less than one year; must start within one year of being set up; the annual amount may not decrease by more than 5 % from year to year.
• Express notice: the taxpayer must notify the insurer that the annuity constitutes the reinvestment, for exemption purposes.
• Non-compliance: total or partial breach of the contract (early withdrawal of economic rights, failure to set up the annuity within the deadline) makes the exempted gain taxable, via a supplementary self-assessment with late-payment interest.

🧮 Example: partial reinvestment

1. Capital gain obtained: €100,000
2. Total proceeds from the transfer: €200,000
3. Amount reinvested in annuity: €150,000
4. Reinvested proportion: 150,000 / 200,000 = 75 %
5. Exempt gain: 75 % × 100,000 = €75,000; the remaining €25,000 is taxed.

Reverse mortgage: tax treatment

Amounts received as a reverse mortgage on the habitual residence are not taxed in the personal income tax when the borrower is over 65 and meets the specific financial regulation requirements.

A reverse mortgage is the loan or credit secured by mortgage on the habitual residence of the borrower, provided that it meets the following requirements:

• The borrower and any designated beneficiaries must be 65 or older.
• The debtor receives the amount through periodic or one-off disbursements.
• The debt is only enforceable by the creditor (and the security can be foreclosed) on the death of the borrower or, if so stipulated, of the last beneficiary.
• The mortgaged property must be appraised and insured under Act 2/1981 on the Mortgage Market.
• Only authorised credit institutions and insurance companies operating in Spain may grant reverse mortgages.

💡 Why it is not taxed: the reverse mortgage is a loan (not income). What the taxpayer receives is debt secured against their assets; on death, the heirs repay the debt with the inheritance or with the property itself. That is why it falls outside the personal income tax taxable event.

Personal minimum increased by age

The personal minimum of the personal income tax (the portion of income exempt from taxation as it covers basic needs) increases with the taxpayer's age:

In the event of death during the year, the full minimum applies without proration. In a joint return, the other spouse does not generate an independent minimum, but the age-based increment is still computed if they are over 65 or 75.

📌 These amounts are those approved by the State. Illes Balears, Galicia and Madrid replace these amounts in whole or in part with their own figures for residents in their territory. See the breakdown by Autonomous Community in Personal and family minimum.

Minimum for ascendants over 65 or 75

The taxpayer with ascendants in care may claim an additional minimum for each ascendant who meets the requirements:

Ascendant requirements (all cumulative):

• Age over 65 on the accrual date (typically 31 December), or any age if they have a disability ≥ 33 %.
• Cohabitation with the taxpayer for at least half of the tax period (cohabitation is considered if the ascendant with disability is in a specialised centre at the taxpayer's expense).
• Annual income of the ascendant no greater than €8,000 (excluding exempt income).
• The ascendant does not file a personal income tax return with income above €1,800.

Other deductions available to seniors

Beyond the minimums, senior taxpayers may apply state deductions for persons with disability in care when requirements coincide. The operational detail (amounts, advance payment via form 143, transfer and adjustment) is in the dedicated article.

• Family and disability deductions on the differential tax liability
• Personal and family minimum
• Capital gains and losses
• Autonomous Community deductions

The 17 Autonomous Communities also include specific regional deductions for seniors (rental housing, retirement home expenses, ascendant care…). See the full list by community in the autonomous deductions article.

Frequently asked questions

Do I have to reinvest the proceeds of the sale of my home for the gain to be exempt?

No, if you are 65 or older on the sale date and the property was your habitual residence, the gain is exempt with no further requirement. The reinvestment in annuities is a different benefit applicable to the sale of any asset (shares, funds, second homes), not just the habitual residence.

If I sell two homes in the same year, can I reinvest €240,000 for each?

No. The €240,000 limit is per taxpayer, not per transaction. If you sell two assets and want to apply the reinvestment exemption, the total amount reinvested in annuities cannot exceed those €240,000 across your tax lifetime.

Does reverse mortgage proceeds count towards the filing obligation threshold?

No, because reverse mortgage is not income: it is a loan. It is not counted among earned income, capital income or capital gains. It will only be reflected for tax purposes when the heirs settle the debt upon the borrower's death.

Does my father count as an ascendant in care if he is 70 and receives a €9,000 annual pension?

No, because his income (excluding exempt amounts) exceeds €8,000 per year. A retirement pension from Social Security is not exempt; it is earned income. If he received €7,500 you could apply the minimum for ascendants.

If my father lives in a retirement home I pay for, can I apply the minimum for ascendants?

Yes, provided the home is paid for by you and your ascendant meets the other requirements (over 65 or disability ≥ 33 %, income ≤ €8,000, does not file a return with income > €1,800). The rule treats placement in a specialised centre at the taxpayer's expense as cohabitation.

Are aids for retirement homes or day-care centres always exempt?

No. The exemption only applies if the recipient is over 65 or has a disability ≥ 65 % and, in addition, their remaining income does not exceed 2 × IPREM (€16,800 with the 2025 IPREM of €8,400). If that threshold is exceeded, the aid is taxed as earned income.