At InfoMoney, partner at Maneira Advogados answers questions about Income Tax

In response to a reader's question, the InfoMoney agency website published an explanation by lawyer Verônica Melo de Souza, partner in the tax law area at Maneira Advogados, on how to declare renovations made to the property in Income Tax.

I renovated my house: how do I report the amounts paid in Income Tax 2022? Expert responds

By Suzana Liskauskas
Mar 31, 2022

Reader's question: How to declare renovations made to the property in Income Tax?

Response from Verônica Melo de Souza*

The amounts paid by the taxpayer relating to property renovations must be declared in the “Assets and Rights” form (File 17 – Improvements), in the property description. The Federal Revenue's guidance is to declare improvements separately from the property and registered by calendar year.

It is advantageous to declare the improvements made to the properties, because these values become part of the property’s acquisition cost.

In practice, this means that, in a future sale, the value of the property (acquisition cost) will be higher for the purposes of calculating capital gain, which is the positive difference between the sale value and the property's acquisition cost. The effect of this is to reduce the tax paid on the sale.

According to the Federal Revenue Service, the value of improvements, as well as the value of the property, should not be updated annually.

Save invoices and receipts

Improvements made to the property must be proven with suitable documentation. Therefore, it is important that the taxpayer maintains the invoices and receipts corresponding to the declared renovation values. It is worth noting that, in the declaration, the value of the property in the deed remains the same.

The IRS advises that invoices related to improvements must be in the name of the holder of the income tax return.

Reform period

The amounts declared relating to property renovations must have been paid in the same base year as the declaration. Therefore, in the 2022 Income Tax Declaration, referring to the base year 2021, renovation expenses must have been incurred in 2021.

To declare expenditure on renovations in previous years, it will be necessary to rectify the Income Tax Declarations for the respective years.

*Verônica Melo de Souza is a partner in the Tax Law area at Maneira Advogados, specializing in international tax law. He has more than 12 years of experience in the tax area between office and company, having worked for 8 years in the Telecommunications and Multimedia sector.

https://www.infomoney.com.br/minhas-financas/reformei-minha-casa-como-informo-os-valores-pagos-no-imposto-de-renda-2022-especialista-responde/