How to declare purchase, sale and rental of real estate in the IRPF?

One of the subjects that generate more doubts to the taxpayer is related to real estate. Doubts range from how to declare a property in the Income Tax to how to report on purchase, sale and rent earnings to the Tax Authorities. A Brazil Agency spoke with Professor of Accounting Sciences, Deypson Carvalho, from the Centro Universitário do Distrito Federal (UDF), to answer these questions.

Other topics have already been addressed: what to do before and start the declarationoe on how to declare income.

The material is part of a special series of vehicles from Brazil Communications Company with tips on how to declare the Income Tax, which runs until 23:59 on May 31st. You can follow the entire series on Radioagência Nacional by clicking here.

Click and check out the IR 2023 FAQ series

Who is required to declare earnings from real estate leases and how to make the declaration?

Some people’s main or secondary income is income from renting real estate. When it comes to reporting to the tax authorities, doubts do not take long to appear. In this sense, the listener José Daladier has a question: “I have a leased property, in which I receive monthly rent. Do I have to declare this income? If I must, how do I do it?”.

If the taxpayer is on the list of people required to declare income tax, he must, in fact, declare earnings from rents. Deypson Carvalho points out that the way of declaring differs from the source that made the payment.

“Earnings arising from leases of real estate received from legal entities must be informed in the form “Taxable Income Received from Legal Entities”, while income from rents received from individuals must be informed in the form “Income Received from Individuals and the Abroad” provided that, in both cases, the taxpayer is obliged to deliver his statement to the Tax Authorities”, he explains.

In the case of receipt coming from an individual, the professor points out that the monthly payment of the so-called carnê-leão must be completed. “In 2022, the exemption limit of the monthly progressive table was R$1,903.98, which obliges the taxpayer to fill in the lion’s pass for the period of the calendar year of 2022 every time the receipt of rent exceeds this amount during the month,” he says.

The data from the carnê-leão will be crossed with the data from the annual declaration. “In the event of a discrepancy, the Federal Revenue Service will withhold the declaration in the tax net until the proper correction is made on the taxpayer’s own initiative or by subpoena”, explains Deypson.

How to make the correct declaration of the purchase of real estate?

In addition to the dream of having your own home, buying a property also involves a lot of bureaucracy. Obviously, the bureaucracy extends to the Income Tax Declaration. In this sense, doubts arise about how to declare the good.

One of them is by reader Evonir Vieira da Silva. “Last year I bought an apartment worth BRL 140,000 with money I earned. I would like to know if I would have to declare the flat this year. Will I be charged for having purchased it?”.

The answer is yes. As the 2023 Annual Income Tax Adjustment Statement relates to the calendar year 2022, all financial transactions relating to income received and payments made, including the purchase of real estate and other assets during the year 2022, must be included in the statement.

“Properties acquired in 2022 must be reported by the taxpayer in the Assets and Rights form of the 2023 Income Tax Declaration at the acquisition cost, that is, the amount actually paid in the transaction”, says Deypson Carvalho.

In the event that the property was purchased through bank financing, the amounts paid during the entire financing period must be entered in the Assets and Rights form, on the base date of 12/31/2021 and 12/31/2022, by the sum of all installments paid up to the respective base date. This rule also applies to real estate acquired through a consortium.

The professor points out, however, that there is no Income Tax to be paid by the taxpayer at the time of acquisition of the property. “The taxation of Income Tax will only occur in the event that the property is sold at a future date for an amount above its acquisition cost that was registered”, he explains.

The issue of cost also generated a question sent to our report, by reader Lilia Dalva. “Why does the Income Tax not accept real estate price updates and, in case of sale, we have to pay an unrealistic tax”, she asks with some indignation.

Deypson Carvalho confirms that, in fact, the value of the property cannot be updated, but points out that there are three exceptions. “The value of the acquisition cost of the property may change when the property is acquired in installments, incremental reforms occur in the property after its initial acquisition and as a result of expenses incurred during the period of progress of the work, provided that the payments are destined to the construction of the property”, he says.

How to declare financed real estate or with payroll loan?

If the acquisition of the property took place in installments, the declaration has some specifics. “The property purchased through real estate financing must be included in the Assets and Rights form at the cost of acquisition, that is, by the amount paid up to the base date of the information to be inserted in the Income Tax Declaration”, points out the professor .

Reader Pierry Bós reports, however, a slightly different situation that left him with doubts. “I have a question every time I go to do my IR, because I have financed property and I also have payroll loans. How can I declare these two things?”, he asks.

Deypson Carvalho points out that financing and loans must be declared in different ways. “The debt should not be included in the Debts and Real Encumbrances form of the Declaration if the financing is framed in the Financial Housing System or in a modality in which the asset is given as guarantee for the payment of the debt, as is the case of fiduciary alienation, mortgage and pledge”.

In situations where resources from the Severance Indemnity Fund (FGTS) are used to pay part of the property or real estate financing installments, the amount received relative to the FGTS must be included in the Exempt and Non-Taxable Income form , while the amount of FGTS paid to the seller of the property or to the financial agent for the payment of installments related to real estate financing must be added to the value of the acquisition cost of the property and be informed in the Assets and Rights form.

The loan (whether consigned or not), unlike real estate financing where the property was offered as collateral, must be informed in the Debts and Real Encumbrances form containing the situation of the loan on 12/31/2021, the situation on 12/31/ 2022 and the loan amount paid during the year 2022.

What if the property was purchased jointly? How to make?

Another common question is about buying a property with money from more than one person. Reader Fatima Brandão has a specific question. “How do I sell an apartment that is in my name, but my partner gave half the amount?”, She asks.

The professor points out that the purchase of a property made by a couple can be informed in the Income Tax Declaration in three different ways:

• The first option is to inform the property in the Assets and Rights form only in the declaration of one of the couple’s CPFs. In this case, in the partner’s declaration, it must be mentioned in the Assets and Rights form, in the group and code “99”, for the amount of R$ 0.01, that the property is listed in the other’s CPF.
• A second alternative is to make the same property appear in separate declarations, informing in the Assets and Rights form the equivalent of 50% of the property in each of the two declarations.
• The third way is for the couple to opt for the statement together! In this case, all assets that were acquired by the couple must be listed in the Assets and Rights form of the holder of the declaration.

How to declare a property sale?

If, when buying a property, the taxpayer does not pay income tax, the same cannot be said when selling it. The difference between the sale value and the purchase price of the property will be subject to income tax. So much so that you need to fill out a document for calculating and collecting taxes.

This is the Capital Gains Statement, better known as GCAP. It must be done by the last day of the month following the sale of the property and is available on the Federal Revenue website.

“GCAP will calculate the tax due, the income subject to exclusive taxation and the exempt portion, will allow the printing of the document for payment of the tax and will also allow the import, through the Income Tax declaration program 2023, of all this information” , explains Deypson Carvalho.

If the property is sold in installments, this condition must be informed to GCAP so that the capital gain can be deferred in proportion to the receipts in installments. This impacts on the Income Tax to be paid.

There is a way to deduct this Income Tax to be paid: if you use the money from a sale to purchase another property within a period of up to 180 days. Reader Rita Amaral has a question: “I sold a property in October last year with a down payment and financing from Caixa and I purchased another property on the ground floor. It turns out that I only received the last installment of Caixa now in February 2023. How am I going to go about declaring this if the declaration refers to 2022?”, she asks.

Deypson Carvalho points out that GCAP itself already takes this variable into account. “GCAP itself will make the proper classification of the exemption from Income Tax levied on the capital gain earned on the sale of residential properties, regardless of whether or not there was the turn of the year”, he says.

And in the IR statement, how to declare the sale? “The taxpayer will need to write off the property sold in 2022 in the Assets and Rights form, informing the sales data in the “discrimination” field and simultaneously excluding the value of the property in the status field on 12/31/2022”, says the professor.

To read and listen to all the articles in the IR 2023 Tira-Dúvidas series, access the special page.