Investment approach
What You Can Deduct from Property Income in Spain
What you can deduct from property income in Spain depends on status and purpose. For rent: interest, repairs, taxes, depreciation up to 3% a year. For resale: costs go into the property's cost base.
From rental income, a resident of Spain and a resident of the EU deduct loan interest, repairs and upkeep, local taxes, insurance, utilities and depreciation of the building of up to 3% a year. A non-resident from a third country still calculates tax on gross rent. A company depreciates the building under a 2% table, and a flat bought for resale is carried as inventory and is not depreciated. As of 12 October 2026.
What is deductible and for whom
| Expense | Rent, resident of Spain and resident of the EU or EEA | Rent, resident of another country | Resale |
|---|---|---|---|
| Loan interest | Yes, up to the income from the property | No | Individual: not part of the acquisition cost; SL: expense, with a cap |
| Repairs and upkeep | Yes, up to the income from the property | No | Improvements go into the property's cost |
| IBI (annual property tax), comunidad (owners' association), insurance | Yes | No | SL: expense; for an individual art. 35 LIRPF does not name them |
| Building depreciation | Up to 3% a year | No | No, the property is carried as inventory |
| ITP (transfer tax) and notary on purchase | Not deducted from income, but affect the depreciation base | No | Part of the acquisition cost |
Legal basis: art. 23 LIRPF (Ley del IRPF, the personal income tax law) and art. 13–14 Reglamento IRPF for individuals, art. 24 TRLIRNR (the non-resident income tax law) for non-residents. The question of deductions for third countries is being contested in court; details are in the article on non-resident rental tax.
Repair or improvement: the line that changes the tax
The law treats as repairs and upkeep the work that regularly keeps a property in its usual condition (painting, plastering, repair of building services), and the replacement of elements: heating, a lift, doors. Costs of extension and improvement cannot be deducted from rent (art. 13 Reglamento IRPF). They increase the acquisition cost and reduce the gain on sale.
The cap: the sum of interest and repair costs for each property cannot exceed gross rental income. The remainder is carried forward for the next four years (art. 23.1.a LIRPF). So a large renovation before letting may not be deducted in full in the first year, and the remainder rolls into later years.
How to classify particular works is a question for the asesor fiscal (tax adviser) before the renovation starts, not after. Replacing heating counts as replacing an element, and extending floor area counts as an improvement.
How 3% depreciation works
For a building, depreciation of up to 3% a year is allowed, calculated on the greater of two values: acquisition cost or cadastral value, excluding the land. If the land share is not known, it is determined in proportion to the cadastral values of land and structure (art. 14 Reglamento IRPF). Furniture let together with the flat is depreciated under a simplified table.
A worked example, not a forecast. The flat costs €400,000, land share 30% (assumption), so €280,000 is depreciated. Depreciation at 3% is €8,400 a year. At a rate of 19%, the tax falls by €1,596 a year.
But there is a flip side. On sale, the acquisition cost is reduced by depreciation, and the minimum is counted in any case, even if you did not claim it (art. 40 Reglamento IRPF). After five years that is €42,000 of extra gain, and at 19% it is €7,980. That is exactly what you saved over five years at €1,596 a year. For an EU non-resident whose rent and gain are both taxed at 19%, depreciation shifts the tax in time rather than cancelling it. For a resident the rates differ, and the effect depends on income.
A company: the 2% table and the cap on interest
In impuesto sobre sociedades (corporate income tax), buildings and housing are depreciated under a table: a maximum straight-line coefficient of 2% and a period of up to 100 years (art. 12 LIS). A flat bought for resale is carried as inventory with no depreciation, and ITP and renovation go into its cost. Interest on loans is deductible up to 30% of operating profit, and at least 1 M€ is always deductible (art. 16 LIS). Other features of SL (Spanish limited company) taxes are covered in the article on taxes of an SL that owns a project.
Who this calculation is not for
If you let the property with services (tourist rental), sell housing as a business or have several properties, the rules differ and the general calculation does not fit. The same goes for residents of third countries with a double taxation treaty: deductions may affect the credit of tax at home.
Questions for the asesor fiscal: which of the works on my property are repairs and which are improvements, what land share to use for depreciation, whether ITP and notary costs go into its base, and how to treat empty months between tenants. How deductions and resale add up to a project's tax is shown in the article on tax on flipping profit. The general tax map is collected on the page for a foreign investor.
Questions and answers
Can ITP paid on purchase be deducted from rental income?
No, ITP does not reduce rental income directly. It goes into the acquisition cost: it affects the gain on sale, and whether it enters the depreciation base is worth confirming with the asesor fiscal.
Do I have to claim depreciation if it brings no benefit?
Claiming is not mandatory, but the minimum depreciation will still reduce the acquisition cost on sale (art. 40 Reglamento IRPF). Not claiming it does not lower the tax on the sale.
Is furniture that I bought for letting deductible?
Furniture let together with the home is depreciated under a simplified table of coefficients (art. 14.2.b Reglamento IRPF).
Does the deduction work for a non-resident from the US or the UK?
Under the current text of the law, no. The question is in court: the Audiencia Nacional (Spain's national high court) allowed the deduction in 2025, and the Tribunal Supremo (Supreme Court) admitted the cassation appeal in 2026, with no ruling yet.
