How to declare rental income on Spanish income tax (IRPF)
Which rental income and expenses to declare, the primary-residence reduction depending on when the lease was signed, and the most common mistakes.
If you rent out a home in Spain, the money you receive is taxed under personal income tax (IRPF) as income from real estate capital. The good news: you can deduct a fair number of expenses and, in many cases, apply a significant reduction on the profit.
Which income you must declare
You declare everything you collect from the tenant during the year: the monthly rent and any amounts passed on (for example, utilities the tenant pays through you). The security deposit is not included, because it is a guarantee you will have to return.
Expenses you can deduct
- Interest on the loan used to buy or improve the property.
- IBI (annual property tax), waste collection fees and other local taxes.
- Homeowners' association fees and insurance (home, non-payment).
- Repairs and upkeep (painting, fixing a boiler). Note: improvements are not deducted as an expense, they are depreciated.
- Depreciation: 3% per year on the greater of the cadastral value of the building or the acquisition cost.
- Management and formalization costs: agency, lawyers, notary attributable to the rental.
The key is to keep every invoice and be able to link it to the rented home. Keeping properties and expenses organized throughout the year turns the tax return from a headache into a routine task.
The reduction for letting a primary residence
When you rent a property as the tenant's primary residence (not for tourist or seasonal use), the positive net income is reduced. The percentage depends on when the lease was signed (article 23.2 of the IRPF Act):
| Lease signed | Reduction |
|---|---|
| Before 26 May 2023 | 60% |
| From 26 May 2023, general case | 50% |
| From 26 May 2023, with conditions | 60%, 70% or 90%: refurbished home, letting to young tenants or a rent-stressed area |
In other words, on a new lease with no special conditions you pay tax on half the profit. To apply it you must have correctly declared that income; it does not apply to amounts the tax authority later regularizes.
Common mistakes
- Not prorating expenses for the days actually rented out.
- Confusing a repair (100% deductible) with an improvement (depreciated).
- Forgetting depreciation: it is one of the expenses that reduces the bill the most.
- Failing to declare and losing the primary-residence reduction.
In short
Declare all income, deduct documented expenses, don't forget depreciation, and apply the reduction that fits if it is a primary residence: 50% on a new lease, 60% if it was signed before 26 May 2023. With properties, contracts and payments well recorded throughout the year, preparing the return is a matter of minutes.
This guide is informational and does not constitute tax advice. When in doubt, consult an adviser.