Renting out a flat in Spain: what you really pay, and the expenses almost nobody claims

Renting out a flat looks like the easy part: you sign the contract, you collect every month, and that’s it. The complicated bit shows up in the tax return, and almost always for two opposite reasons: many people assume that money is taxed lightly (it’s taxed at their highest rate) while at the same time leaving out expenses the law grants them, starting with the biggest one of all, which doesn’t cost them a euro a year.

This article sorts out both things: what you actually pay on residential rental income, and what you can subtract before you get to that figure. Every legal reference is at the end, in case you want to check anything.

First mistake: rental income isn’t taxed like savings

When someone sells shares or collects interest on a deposit, that goes into the savings tax base, at those 19% to 28% rates everyone has heard about. Rental income doesn’t work that way.

What you collect for renting out a flat is income from immovable capital, and the law reserves the savings base for income from movable capital and for gains on transfers of assets.¹ Everything else goes into general income, which is taxed on the progressive scale: it adds to your salary or your invoicing and pays at your marginal rate, the rate on the last euro you earn.²

The practical consequence is simple. Two people collecting the same rent pay very different amounts depending on what they earn from everything else. It also explains why the “it yields me 5%” calculation rarely works out as expected: that 5% is gross, and the tax that eats it isn’t a flat 19%, it’s your bracket.

If you don’t know your marginal rate, the income tax simulator gives it to you from your income and your autonomous community, which also matters.

Everything you subtract before the reduction

The good news is that you’re not taxed on what you collect, but on what’s left. Gross income is everything the tenant pays you on any account,³ and from that you subtract the expenses necessary to obtain it. The regulation lists them one by one:⁴

Mortgage interest on the flat itself, plus other financing costs. Careful: the interest, not the instalment. The part that repays principal isn’t an expense, it’s your own money changing places.

Repair and maintenance costs: painting, fixing installations, replacing the boiler or the doors of your own flat.

Non-state taxes and surcharges: council tax (IBI), waste collection fees.

The service charge, in full. The Agencia Tributaria places it among the “amounts accrued by third parties as a result of personal services”, alongside management, the concierge or security,⁵ so it doesn’t count towards the cap we’ll get to in a moment. And this matters more than it looks: in a flat, much of the maintenance isn’t something you pay for yourself but something you pay through the building (the lift, the stairwell, the façade, the entrance hall), and all of it is already inside that charge.

Costs of drawing up the contract and legal defence relating to the property.

Doubtful debts, once more than six months have passed since the first collection attempt without the debtor renewing the credit.

Insurance: home, liability, rent default.

Utilities you pay yourself.

Depreciation, which gets its own section below because it moves the most money.

There’s one limit worth knowing, and it only affects two of those items. Interest and repair and maintenance costs, together, cannot exceed the gross income that flat produced during the year. What’s left over isn’t lost: it carries forward to the next four years, with the same cap each year.⁶ So major works in a weak year aren’t wasted, but it’s worth bearing in mind when deciding when to do them.

The remaining expenses (council tax, insurance, service charges, depreciation) have no such cap and can push the net result into negative territory.

Depreciation: the expense almost nobody claims

It’s the biggest expense of a rental and the most frequently forgotten, because it doesn’t come out of your pocket: there’s no invoice, no receipt, nothing to remind you. It’s the law acknowledging that the building wears out over the years.

Each year you can deduct 3% of the greater of these two values, always excluding the land: the acquisition cost paid, or the cadastral value.⁷

Three details decide the figure:

Land isn’t depreciated, and it has to be separated out. If you don’t know its value, the acquisition cost is apportioned between the cadastral values of the land and of the building, which appear on your council tax bill.⁸ It’s a thirty-second division that many people never do, and without it there’s no depreciation to claim.

“Acquisition cost paid” isn’t just the price. It includes the expenses and taxes inherent to the purchase: transfer tax or VAT, the notary, the land registry, the paperwork. And if the flat came to you by inheritance or gift, it isn’t zero: it’s the value declared for inheritance and gift tax purposes (or the value assessed), plus the expenses and taxes of that acquisition.⁹ Many people who inherited a flat believe they can’t depreciate anything, and that’s not the case.

It’s prorated over the days the flat was rented, like the rest of the expenses.¹⁰ And accumulated depreciation across all years cannot exceed the acquisition value of the building.¹¹

Repair or improvement: the same works, two different years

This is the distinction that moves the most money and is worst understood, because from the building site the two look very much alike.

Repair and maintenance is what’s needed to keep the flat in normal use: painting, rendering, fixing installations, or replacing elements such as heating or security doors. It’s deducted in the year, against rental income, with the cap described above.⁴

Extension or improvement is what makes the flat worth more or last longer. The law puts it bluntly: amounts spent on extension or improvement are not deductible under that heading.⁴ It isn’t lost, it just takes another route: it’s added to the cost of the property and recovered at 3% a year through depreciation, and it also raises the acquisition value when you sell, which reduces the capital gain.

And this is where special levies come in, which is how a flat owner ends up facing major works they never commissioned. A levy has no label of its own: it follows whatever it pays for. If it funds conservation work (repairing the façade, replacing a worn-out lift), it goes with repair costs. If it funds an improvement, it isn’t an expense of the year: it’s cost of the property, depreciated at 3% and added to the acquisition value.⁴

And watch out here, because this is where almost everyone slips: it makes no difference that the levy reaches you inside the monthly service charge. Plenty of buildings don’t separate the two and bill you a single amount, and it’s easy to assume that everything is therefore a “community expense” and fully deductible. It doesn’t work that way: what decides is what the money funds, not which line of the bill it arrives on.

The Directorate-General for Taxes ruled on exactly this case: an owner with a let flat whose building approved installing a lift where there wasn’t one, paid through a levy “abonando mensualmente de manera conjunta al recibo de la comunidad” (billed monthly together with the service charge). The answer is that it counts as investment or improvement of the property, so it isn’t an expense of the year: it is depreciated at 3%. And it adds a detail worth noting, because it changes the year you start: depreciation runs from the moment the works finish, not from when you pay the levy.¹²

In practical terms: if a levy lands, ask the managing agent for the breakdown or the minutes recording what it’s for. That piece of paper decides whether you deduct it this year or over the next thirty-three.

Two practical consequences follow. First: ask for invoices itemised by work item, not a bare “full renovation”, because the split between one thing and the other is yours to justify. Second, and this is for anyone thinking of renting later on: a repair paid for years before putting the flat on the rental market is never coming back, because it can only be deducted against rental income. Improvement work, on the other hand, waits for you in the cost of the property for as long as it takes.

The reduction: 50% by default, and when it goes up

A reduction applies to positive net income from renting out a home, and this is where most people still have the old figure in their heads. Law 12/2023 changed it, and today it depends on the date of the contract:¹³

• Contracts before 26 May 2023: the traditional 60%.
• Contracts from that date: 50% in general. It rises to 60% if the home was refurbished in the two years before signing; to 70% if it’s the first letting in a stressed housing market area with a tenant aged 18 to 35, or if the tenant is a public administration or a non-profit providing social housing; and to 90% if, in a stressed area, you cut the rent by more than 5% compared with the previous contract.

Two warnings about this reduction, both of which appear in the law itself:

It only applies if you declared it yourself, in a self-assessment filed before any review begins. If it’s the Agencia Tributaria that uncovers the rental, there’s no reduction on what comes to light: you pay on the full net income, plus a surcharge or a penalty.¹³

And it only covers residential lettings. Renting out a commercial unit, a standalone parking space or a tourist flat reduces nothing.

And then there’s your autonomous community

Everything above is national and applies the same anywhere (except in the Basque Country and Navarre, which run their own income tax). On top of that, ten autonomous communities have deductions in the regional portion of the tax bill aimed at the landlord, not the tenant, which is what almost everyone assumes.

Mind the difference, because it isn’t a nuance: the expenses above reduce what you declare; this reduces the tax itself, right at the end. Two different things, in two different places of the return.

These are all of them for the 2025 tax year:¹⁴

In Andalucía, Castilla-La Mancha, Cataluña, the Region of Murcia, La Rioja, Ceuta and Melilla there’s nothing for the landlord: their rental deductions are written for the tenant.

Three things you only see by looking at the whole table, and they’re worth more than any single row:

The pattern repeats. Almost all of them reward the same thing: bringing an empty flat to the market, or paying what it takes to make it lettable. If you’ve just inherited a closed-up flat or you’ve had one sitting idle, that’s exactly your case.

The lodged tenancy bond is the filter. Madrid, the Balearics, the Canaries and the Valencian Community all require the receipt for the bond lodged with the regional body. Without that piece of paper there’s no deduction, however many invoices you’ve kept, and it’s a formality the landlord is obliged to complete anyway.

Several also require declaring the income as immovable capital. So the deduction is tied to having declared it properly: it isn’t a route for anyone who leaves the rent off the return.

One warning: this changes every year and with every regional budget act. Before claiming anything, check it in the Agencia Tributaria’s manual of regional deductions, which publishes them one by one with their requirements.

The months the flat sits empty are taxed too

When a flat is neither rented nor your main home, it isn’t taxed at zero: it’s taxed through imputed property income, which is 2% of the cadastral value, or 1.1% if that value was revised in the current tax year or in the previous ten.¹⁵ It’s calculated in proportion to the days of the year in that situation.

So a flat that was rented for eight months and empty for four goes into the return twice over: income from immovable capital for the days it was let (with expenses prorated) and imputed income for the days it was empty. It’s not much money, but it’s a classic oversight.

If you move abroad, the tax changes

If you stop being a Spanish tax resident, you leave income tax behind, but you don’t stop paying tax in Spain on that flat: rent from a property located in Spain is declared under Non-Resident Income Tax, on form 210.

And three things change at once:

There’s no reduction. The non-resident law says the base is the gross amount, with reductions expressly ruled out.¹⁶ That 50% reduction belongs to resident income tax and stays there.

Expenses, only if you live in the European Union or in a European Economic Area country with effective exchange of tax information. In that case you can deduct the expenses provided for in the income tax law, depreciation included, if you can show they relate directly to that income.¹⁷ If you live outside that scope, you’re taxed on the gross amount.

The rate is flat: 19% for residents of the EU or the EEA with exchange of information, and 24% as a general rule.¹⁸

It’s a big difference and it depends on the destination country, so if you’re considering moving and leaving the flat rented out, run that calculation before choosing where to go.

A full worked example

A flat let for the whole year at 900 euros a month, under a contract signed in 2025.

Gross income: 10,800 euros.

Expenses: council tax 420, service charges 780, insurance 190, mortgage interest 2,100 and a 600 repair. That adds up to 4,090. (Interest plus repair is 2,700, well below the 10,800 of gross income, so the cap isn’t in play.)

Depreciation: the flat cost 170,000 euros plus another 10,000 in purchase taxes and fees, so 180,000 of acquisition cost paid. On the council tax bill, the building is 60% of the cadastral value and the land 40%. The depreciation base is 60% of 180,000, that is 108,000 euros (higher than the cadastral value of the building, so this one prevails). 3% comes to 3,240 euros.

Net income: 10,800 − 4,090 − 3,240 = 3,470 euros.

50% reduction: 1,735 euros are added to your general income.

At a 37% marginal rate, the tax is around 642 euros on 10,800 collected. And here’s the moral: if you forget the depreciation, net income rises to 6,710, the reduction leaves 3,355 and the tax goes up to about 1,241 euros. Almost 600 euros a year of difference for a line that costs you nothing. Your marginal rate probably isn’t 37%, so check it in the income tax simulator before taking the figure at face value. And that calculation is only the national part: if your community has a landlord deduction, it comes off afterwards, from the tax already worked out.

How does Cuéntamo help with this?

The problem with a rented flat isn’t doing the sums once a year: it’s that the data behind those sums is spread across twelve months and several places. Council tax lands in one month, the building’s special levy in another, the repair arrives as a loose invoice, and come filing season you have to reconstruct it all from memory.

In Cuéntamo you can track the flat with its own tags and see both of the things that matter at once: what’s going to come in each month, with the rent and the recurring expenses already projected, and the yearly total by category when it’s time to file. It’s the same idea we apply to recurring household expenses, except here the result also goes into your tax return. And if the flat is an investment, it enters your net worth at its current value minus the outstanding mortgage, not at what you paid for it.

Frequently asked questions

What rate is rental income taxed at in Spain?

At your marginal income tax rate, because income from immovable capital goes into general income, not the savings base.^{1 2} There’s no fixed percentage: it depends on what you earn from everything else and on your autonomous community.

Can I deduct the mortgage instalment on the flat I rent out?

Only the interest portion, not the capital repayment.⁴ On top of that, this interest together with repair and maintenance costs cannot exceed the flat’s gross income for the year; the excess is deducted over the following four years.⁶

How much can I depreciate on a flat I inherited?

3% a year on the value declared or assessed for inheritance and gift tax purposes, plus the expenses and taxes of that acquisition, always excluding the land value.⁹ The fact that you paid no price for it doesn’t mean you can’t depreciate it.

Is the residential letting reduction still 60%?

Only for contracts signed before 26 May 2023. For contracts from that date the general figure is 50%, rising to 60, 70 or 90% in specific cases.¹³

Is there a regional deduction for letting out a flat as the owner?

In ten communities, yes: Aragón, Asturias, the Illes Balears, the Canaries, Cantabria, Castilla y León, Extremadura, Galicia, Madrid and the Comunitat Valenciana have deductions aimed at the landlord, almost all of them for bringing an empty home to the market or for the cost of getting it into a lettable state.¹⁴ In Andalucía, Castilla-La Mancha, Cataluña, Murcia, La Rioja, Ceuta and Melilla the rental deductions are for the tenant only.

The levy comes inside my service charge bill. Can I deduct all of it?

Not necessarily: what decides is what that levy funds, not that it arrives on the same bill. If it pays for conservation work, it goes with repair costs; if it pays for an improvement, it isn’t an expense of the year and is recovered by depreciating at 3% from the moment the works finish.¹² Ask the managing agent for the breakdown or the minutes so you know which of the two you’re in.

Do I have to declare the months the flat sat empty?

Yes, through imputed property income: 2% of the cadastral value, or 1.1% if it was revised in the last ten tax years, in proportion to the days it wasn’t let.¹⁵

Figures for 2026. The 3% depreciation rate and the 2% / 1.1% imputed income rates are structural, in force since 2007 (Law 35/2006 and Royal Decree 439/2007); the residential letting reductions have applied since 2024, to contracts signed from 26 May 2023 (Law 12/2023); the Non-Resident Income Tax rates (19% and 24%), since 2016 (Royal Legislative Decree 5/2004).

This article is checked against official sources and reviewed periodically. If you spot anything out of date, email us at [email protected].