Deductible Expenses for Property Owners in Spain – Maximise Your Tax Savings

1. Deductible Expenses for Rental Income (Non-Resident EU/EEA Owners)

If you’re a non-resident of Spain renting out property here, Spain taxes your rental income under the Non-Resident Income Tax (IRNR). The general rule for non-resident landlords is:

• EU/EEA citizens (including UK for now in practice, and other EEA like Norway, Iceland) can deduct expenses from their rental income, being taxed on the net profit at 19%.
  
  

• Non-EU citizens (USA, Canada, Australia, etc.) cannot deduct any expenses – they’re taxed on gross rental income at 24%.
  
  

For those who can deduct, here are typical deductible expenses (as confirmed by Spanish tax law and practice):

• Mortgage Interest: Interest on a loan used to purchase or improve the property is deductible. Only the interest portion, not principal repayments.
  
  

• Repairs and Maintenance: Costs to maintain the property in good condition (fixing a leaky roof, repainting, repairing appliances) are deductible. Note: Improvements or expansions (adding a new room, luxury upgrades) are not directly deductible as expenses, though they may be depreciated or count towards cost on sale.
  
  

• Local Taxes and rates: Property tax (IBI) and rubbish collection fees are deductible. Also any community of owners fees you pay.
  
  

• Property management fees: If you use an agency to manage or find tenants, their fees are deductible. Similarly, legal fees for rental contracts or eviction procedures.
  
  

• Insurance Premiums: The cost of insuring the property (home insurance, landlord insurance) is deductible.
  
  

• Utilities and services paid by you: If as the landlord you pay for electricity, water, gas, internet, or other services for the tenant (common in short-term rentals or inclusive rent agreements), those costs can be deducted.
  
  

• Advertising and listing fees: Money spent on advertising for tenants or platform fees (like Airbnb service fees) are deductible as costs of obtaining income.
  
  

• Bad debts: Unpaid rent can be deducted, but only under certain conditions – typically it must be overdue by a certain time (6 months without payment and collection efforts) or the tenant is insolvent.
  
  

• Depreciation: This is a big one – you can deduct an amount for wear and tear of the property itself. Spanish law allows an annual depreciation of 3% of the building value (construction value, not the land). If your purchase deed or cadastral record separates land and building, use that. If not, it’s common to consider, say, 2/3 of purchase as building. Depreciation can be significant and reduce your taxable income even if you have positive cash flow.
  
  

• Furnishings depreciation: If you rent furnished, you may also depreciate the furniture and appliances over their useful life (typically 10% per year over 10 years, or follow official tables if available).
  
  

All expenses must be properly documented with invoices/receipts under your name. Additionally, expenses are only deductible in proportion to the rental period. If you rent only part of the year and use the property yourself part of the year, you can only deduct expenses corresponding to the rental period. For example, if you rent 180 days (half year), you typically take 50% of annual expenses (like IBI, etc.) as rental deductions, while the other 50% might relate to personal use (which is not deductible and instead subject to the “deemed income tax” discussed later).

Maximising for EU landlords: Because you can deduct, make sure to track every eligible expense. A common oversight is forgetting to deduct depreciation – it’s a non-cash expense but quite legitimate and can create a tax loss on paper even if your rental is profitable. Note however: if your deductions exceed income (a net loss), as a non-resident you can’t offset that against other income (Spain doesn’t allow carrying forward rental losses year-to-year for non-residents). But you at least won’t pay tax in a loss year.

2. Deductible Expenses for Spanish Tax Residents (Rental Property)

If you are a tax resident in Spain (Spanish resident landlords), you declare rental income as part of your general income in the IRPF (personal income tax). The range of deductible expenses is similar to above (interest, repairs, taxes, utilities, etc. all deductible), and depreciation 3% of building value applies too.

One big advantage: if after deductions the property rental shows a loss, Spanish residents can offset that loss against other general income (like salary) or carry it forward for 4 years to offset rental profits. Non-residents cannot, as mentioned.

Special 50-60% Rental Reduction: Spain historically gave a 60% tax exemption on net residential rental income for residents renting to long-term tenants (their permanent home). Recent law changes (from 2024) adjusted this to a 50% general reduction, with potential higher reductions (up to 90%) if certain conditions like lowering rent in a stressed area are met. As of 2024, the general rule is: after deducting all expenses, a Spanish resident landlord includes only 50% of the net profit in taxable income if the rental is a dwelling for tenants’ habitual residence. (Holiday lets and commercial leases don’t get this reduction.)

This is a huge tax-saver – essentially half the rental profit is tax-free. To qualify, you need a formal lease agreement stating the tenant uses it as their home, and you should have the tenant’s details (NIE/DNI) on your tax form. Also ensure the tenant is not a relative (rent to close family may disqualify). Keep a copy of the tenant’s padrón registration or a statement that it’s their primary home in case of questions.

(Note: Due to a new Housing Law, the Spanish government tweaked these reductions: 50% base, 60% if certain improvements, 70% for new housing to young tenants, 90% if you cut previously high rent by >5%. But detailed regs are evolving. For simplicity, assume 50% unless you consult an advisor about meeting extra criteria.)

Example for Residents: You rent an apartment and earn €10,000/year. Expenses (interest, fees, IBI, depreciation etc.) total €6,000, net €4,000. If it qualifies as a residential rental, only €2,000 is taxable. If you’re in the 30% tax bracket, you’d pay €600 instead of €1,200. This underscores why using all deductions and ensuring the rental qualifies for the reduction is valuable.

3. Non-Rental Situations: Deemed Income and Second Homes

What if you own a property in Spain that you do not rent out? Non-resident owners still face the “Imputed Income Tax” on second homes. While not exactly deductions, there’s a way to think about minimizing that too:

• The imputed income is 1.1% or 2% of cadastral value, taxed at 19-24%. There are no deductions against this imputed income – it’s a fixed calculation. However, it’s usually modest. One thing you can ensure is that if the cadastral value is very outdated, that actually results in 2% being used (which is higher). After a revision (within last 10 years), they use 1.1%. You as an owner cannot change this directly, but note if a revision happens, your tax might drop.
  
  

• No expenses to deduct here since it’s not actual income. But paying that small tax timely avoids penalties.
  
  

• For residents, your own primary home is not subject to imputed income tax at all (residents only pay imputed on second homes, and they cannot deduct costs either, but they at least don’t pay tax on their main home).
  
  

In summary, the concept of “deductible expenses” mainly applies to generating income. If no income, you can’t deduct the costs (except some wealth tax considerations not covered here).

4. Other Tax Considerations for Property Owners

• Wealth Tax: If you’re subject to Spain’s wealth tax (either as a resident on worldwide assets or a non-resident on Spanish assets), note that mortgages on the property can be deducted from the property’s value for wealth tax calculations. That’s a way to reduce wealth tax. Also, some regions have nearly eliminated wealth tax for residents.
  
  

• Selling the Property: When you eventually sell, keep all those invoices for improvements – they’re not “deducted” annually, but they increase your cost basis, reducing capital gains tax. So indirectly, maintaining good records of property expenses yields tax savings upon sale.
  
  

• VAT for Investors: If you buy a new property and later rent it long-term, you might not reclaim VAT. But if you run short-term lets with services (effectively a business like hotel), you might have to register for IVA (VAT) and then you could deduct VAT on expenses. That’s a more complex scenario for investor-landlords to discuss with a tax advisor.
  
  

5. Maximising Tax Savings: Strategies and Tips

• Keep Documentation: You can only claim what you can prove. Maintain a folder for each property with all invoices (in Spanish if possible, or at least easily understandable) for expenses. If audited, the tax office can deny deductions lacking proper invoices.
  
  

• Use a Spanish bank account for expenses: Pay property expenses from a local account if you can. This creates a clear paper trail and sometimes the tax office asks for proof of payment, not just invoices. Receipts showing bank transfers or direct debits to pay IBI, community fees, etc., bolster your deduction claims.
  
  

• Plan renovations smartly: Necessary repairs are immediately deductible, but improvements are not (they depreciate). However, some improvements might qualify as “repairs” if they’re replacing something worn out with modern equivalent. If you upgrade windows (single to double-glazed), arguably it’s a repair to improve energy efficiency – usually acceptable as expense. But adding a new balcony is an improvement (capitalized). Structuring what work is done as maintenance versus improvement can affect short-term taxes.
  
  

• Avoid periods of vacancy if possible (for rental owners): If your property is empty part of the year, you still incur expenses (like full IBI). But you can only deduct the portion corresponding to rented period. Having it rented more of the year lets you deduct more. That said, don’t take a bad tenant just for that – but it’s a factor in the economics.
  
  

• Consider autonomy vs. company: If you own many properties or do holiday rentals at scale, sometimes owning properties through a Spanish company can allow more flexible deduction of all costs (including some things like home office, vehicles if used for management, etc). Corporate tax is 25%, and interest, depreciation fully count. But companies have their own compliance costs and may face different rules (no 60% reduction). Usually, an individual benefits from the 50-60% reduction which a company does not, so think twice before putting residential rentals in a company unless you’re non-resident non-EU looking purely at the tax rates.
  
  

• Professional advice: Spanish tax rules evolve. For instance, the rental reduction percentages changed with new laws. Also, cities or regions may give deductions (like some city councils give deduction on local tax if you rent long-term at controlled rent). Consult with a tax advisor or the Agencia Tributaria’s guidance each year to catch new opportunities (e.g., deductions for energy efficiency improvements – Spain at times has given tax credits or deductions for eco-renovations).
  
  

6. Common Mistakes to Avoid

• Overclaiming personal expenses: Only expenses directly related to the property and rental are allowed. Some owners try to deduct travel costs to inspect the property or personal use expenses – these are generally not deductible. Do not mix personal vacations with rental expense.
  
  

• Not prorating correctly: If you used the property yourself for half the year, you must split annual expenses between personal and rental use. The tax authority can check utility usage patterns to see if a “rental” was truly available or used by you.
  
  

• Forgetting to deduct at all: Surprisingly, some non-resident owners simply declare gross rent and pay 24% on all of it, not realizing they could deduct because they are EU citizens. This is leaving money on the table. Always apply deductions if you qualify; the forms (Modelo 210) have sections for it, though it’s admittedly complex to fill, so using a fiscal rep or tax service can help.
  
  

• Missing depreciation: As mentioned, it’s one of the biggest deductions and sometimes overlooked. Even if you have no other expenses (imagine a fully paid property, tenant pays utilities), you still get to deduct depreciation. Use it.
  
  

• Ignoring special regimes: If you move to Spain under the “Beckham Law” (expat regime), note that you’re taxed as non-resident (24% no deductions) even though you live in Spain, which can be a downside for rental income. In such a case, maybe putting the property in a spouse’s name who isn’t under Beckham, or other planning, could allow deductions. This is advanced planning area.

By avoiding these mistakes and leveraging every deduction, you ensure you minimise the tax on your rental income or property-related taxes, which improves your net return on investment.

Owning property in Spain can be financially rewarding, and knowing the deductible expenses helps you keep more of that income in your pocket. To summarise: track and deduct all legitimate expenses from rental income, take advantage of special reductions for long-term residential leases, and plan your finances to align with Spanish tax rules. Always maintain good documentation as backup.

If you want personalized assistance in optimizing your Spanish property taxes or have questions on what you can deduct, book an appointment with our tax advisors in Spain. Our experts can review your situation and ensure you’re taking full advantage of the tax-saving opportunities available. Schedule a session here: Book an appointment.