Landlords in Spain could benefit from tax deductions of up to 90% on their rental income, thanks to a new set of incentives aimed at encouraging long-term rentals. Tax advisors are urging property owners to act before the end of the year to make the most of available deductions and exemptions, potentially saving significantly on next year’s income tax.
The Spanish Housing Law, which came into effect in May 2023, has introduced a series of incentives to promote affordable long-term rentals. Among the most significant are the deductions in the Personal Income Tax (IRPF) for rental income, ranging from 50% to 90%. These measures are designed to make renting more attractive for property owners, ultimately stabilising rent prices.
According to the Spanish Association of Tax Advisors (Aedaf), landlords offering permanent rentals can deduct 50% of their net rental income, meaning only half of these earnings are subject to taxation. This reduction, however, only applies if the landlord has declared the income voluntarily before the tax authority begins any verification or inspection procedures.
Higher relief for rentals in pressured areas
Landlords could see these deductions rise significantly, depending on specific conditions. Properties in so-called “pressured residential areas” or those rented at least 5% below previous contract rates are eligible for a 90% deduction. The aim is to encourage stability in regions where demand has driven up rental prices.
There is also a 70% tax reduction for those renting a property for the first time in these pressured areas to young tenants (aged between 18 and 35), or if the rental involves social housing leased to non-profit organisations or public entities. This rate also applies if the tenants are economically vulnerable—either unemployed, with significantly reduced income or from low-income households.
Benefits for renovated properties and specific tenancies
The tax deduction falls to 60% for properties that have undergone renovations in the two years prior to the rental contract. A recent court ruling in Galicia confirmed that this rate also applies to properties rented to students during the academic year, even if the rental period is less than 12 months.
Tax advisors are encouraging landlords to consider renovating their properties now to maximise these tax benefits. Common deductions also include interest and financing costs, property repairs, community fees, insurance, legal services, local taxes, and depreciation. Completing such work before the end of the year could qualify landlords for more favourable tax treatment when filing returns.
Act now to maximise savings
With less than a month left before the year ends, tax advisors are recommending that landlords consider their options now. Whether it’s switching to long-term tenancies, reducing rent to access higher tax deductions, or undertaking repairs to benefit from renovation-related relief, these proactive steps could make a significant difference to next year’s tax bill.
The clock is ticking, and property owners would be wise to prepare now to enjoy the full scope of these new benefits.
Also read: Spanish homeowner circumvents new housing law with short-term rentals