The Spanish Tax Agency has nearly 1 million homeowners in its sights for the 2024 tax return. They are obliged to report rental income from their own property to the tax authority. Those who fail to do so risk facing a high fine.
This year, the Spanish Tax Agency (Hacienda) is focusing on, among other things, the declaration of rental income from own property. In a campaign, the tax authorities have sent warnings to 866,000 taxpayers. Why? To remind them that the tax authority has information about their rental income and that this must be reported in the tax return. Those who fail to do so may face fines of up to 150% of the undisclosed income.
Approximately 40% of rental income goes unreported
According to the Spanish association of tax experts (Gestha), approximately 40% of rental income goes unreported. This means that there are 1 million properties being rented “off the books”. Those who evade the mandatory taxes for these rental incomes may not only face hefty fines but also have to pay the corresponding interest for the elapsed period.
How does Hacienda know if a property is being rented out? For example, by indications of gas, water, and electricity consumption for a property. Or by information provided by a landlord to, for example, obtain fiscal benefits or a subsidy.
Benefits for long-term rentals
Rental income, especially if it exceeds €1,600 per year, must be declared as income from real estate. For long-term rentals (not seasonal, vacation, or tourist rentals, which incur higher taxes to the Tax Agency), the owner can deduct up to 60% of the net income. This measure is intended to encourage long-term rentals.
Deductions Expenses such as the mortgage, service charges – including special contributions – or maintenance or repair costs can also be deducted. Even real estate agent fees, paid by the homeowner, are deductible. Additionally, as a property owner, you can claim expenses for property tax (IBI) and certain municipal taxes as deductions.
Second home
For a second home, the owner must declare an imputed income for that property to the tax authority. Imputed income refers to an estimated or attributed income value assigned to, for example, real estate. This occurs even if there are no actual income derived from it. In the tax system, the imputed income is used to levy taxes based on the assumed income that the property could generate, even if it is not currently being used to generate income.
