If you own a property, see the precautions you should take when informing the value of this property in your 2022 Income Tax return. In general, the declared value should never be changed. There are only a few situations that the legislation allows to change the value of the property from one year to another.
Never update the value of the property by the market price. Always repeat the amount informed in the previous year’s statement. See below which are the main situations in which the value of the property can be increased in the Income Tax and how this should be done.
The most common cases in which the property can have its value readjusted in the Income Tax are when there is construction, renovation and expansion, or when you are still paying the financing of the property. It is also possible to change the value when the property is received in inheritance, but under very specific conditions. See below how to fill out the declaration for the most common cases.
How to declare construction, renovation or expansion
If you have built, expanded or renovated the property, you can add these expenses to the value of the property.
Any material and service that promotes a change or improvement in the property and that has a permanent character is worth: changing the floor, a new room, painting, parts and maintenance services.
However, the purchase of furniture, such as a new sofa for the living room, does not count towards the Income Tax because the furniture can be taken from one residence to another, that is, it is not permanent in the property.
Gather the invoices for the materials and services spent. Get receipts from bricklayers, painters and other contractors. Do not forget to include the professional’s name and CPF, address, contact telephone number, description of the service, amount paid, date and signature of the service provider on the receipt.
For those who have already declared the property in last year’s Income Tax, the process of filling out the declaration is simple. Just import the 2021 declaration into the IR 2022 program and the main fields of the “Assets and rights” form will be filled in automatically.
After importing last year’s declaration, open the “Assets and rights” sheet and click on the property, which should appear in your list of declared goods.
Inform in the “Discrimination” field that the property underwent construction, expansion or renovation and detail the services and amounts spent.
To update the value of the property in the declaration, add the amounts actually paid last year with the construction or renovation with the value of the property declared on 12/31/2020. Put the result of the sum in the “status on 12/31/2021” field.
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For example, if the property was declared for BRL 100,000 on 12/31/2020 and you spent BRL 20,000 on renovations last year, enter BRL 120,000 in the “Status on 12/31/2021” field.
Are you paying for financing? You can also update the value
The same logic applies to those who are still paying the mortgage on the property. Gather proof of installments and inform in the “Discrimination” field the details of the financing and how many installments were paid in the last year.
The total installments paid in 2021 must be added to the value of the property declared on 12/31/2020. Put the result in the “status on 12/31/2021” field.
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For example, if you paid 12 installments of BRL 1,000 in 2021 and the property was worth BRL 100,000 in 2020, then enter the total amount of BRL 112,000 in the “Status on 12/31/2021” field.
Did you use the FGTS to pay off part of the financing? See how to declare
Some people take advantage of the possibility of using the FGTS to advance the payment of mortgage payments.
It is usually possible to make this amortization every two years. If you did this in 2021, you need to fill out two forms of the 2021 IR return.
Follow the guidelines in this other article and inform the amount you used from the FGTS in the “Exempt income” form.
Open the “Assets and Rights” form, click on the form referring to the property and inform in the “discrimination” field that the FGTS was used to deduct benefits, in addition to the benefits normally paid in 2021, as explained above.
Add the value of the property informed on 12/31/2020 with the used value of the FGTS and the installments paid in 2021. Put the result in the “situation on 12/31/2021” field.
Did you reform, use FGTS and are you paying financing? add it all up
If you fit into the three situations listed above, just add all the amounts spent on construction or renovation with the amounts of financing and FGTS withdrawals. Add it to the value of the property declared on 12/31/2020 and put the result in the “situation on 12/31/2021” field.
Do not forget to detail all situations in the “discrimination” field.
Keep all proof of construction or renovation and mortgage payment for at least five years. During this period, the Revenue can summon the taxpayer to give explanations if it finds the values strange.
