Renting out a property in spain can generate an excellent return on investment, but many owners unnecessarily pay too much tax because they are unaware of which expenses are deductible under Spanish law.

At ImmoMoment, we have been guiding owners since 2005 in renting out, managing (property management), and selling real estate on the Costa del Sol. Thanks to more than twenty years of practical experience, we not only know the property market in Marbella, Estepona, and Mijas, but also the tax considerations that landlords must keep in mind.

After all, a correct tax return starts with a clear overview of all legally deductible expenses. This can make a significant difference in the tax you ultimately pay each year.

According to Spanish tax law, residents of the European Union and the European Economic Area are allowed to deduct all expenses directly related to renting out their property. The Spanish tax authority makes an important distinction here between:

• Expenses that are fully deductible, because they arise exclusively from renting out the property;
• Expenses that are deductible pro rata, because they apply to the entire year.

For example, do you rent out your property for only six months? In that case, most annual costs will only be 50% deductible. On the other hand, costs incurred solely to rent out the property remain fully deductible.

Below is a clear overview of all major deductible expenses.

FULLY DEDUCTIBLE EXPENSES

These costs arise solely because you are renting out the property. They are directly linked to the rental income and can therefore be fully deducted.

Rental Platforms

All commissions paid to rental platforms are fully deductible.

Examples:

• Airbnb
• Booking.com
• Vrbo
• Expedia

Property Manager or Rental Agency

Do you hire a property manager? Then all management fees are fully deductible. This includes:

• Booking management
• Guest communication
• Key holding
• Check-in
• Check-out
• Guest services
• Emergency interventions

Cleaning

All cleaning costs between guest stays.

Examples:

• Final cleaning
• Professional cleaning company
• Cleaning staff

Laundry

All costs for:

• Bed sheets
• Towels
• Bath mats
• Kitchen linen

Maintenance and Minor Repairs

Repairs necessary to keep the property rentable.

Examples:

• Replacing a faucet
• Repairing air conditioning
• Replacing a boiler
• Electrician fees
• Plumbing fees
• Leaking repairs
• Repairing roller shutters
• Replacing locks
• Minor painting work

  Note: major renovations or extensions that increase the property value are generally not immediately deductible.

Consumables

All products purchased exclusively for the tenants.

Examples:

• Toilet paper
• Trash bags
• Cleaning products
• Dishwasher tablets
• Paper towels
• Sponges

Welcome Packs

The cost of a welcome pack is also fully deductible.

Examples:

• Water
• Coffee
• Tea
• Wine
• Shampoo
• Shower gel
• Soap

Marketing

All promotional costs for renting out the property.

Examples:

• Professional photography
• Personal website
• Advertisements
• Google Ads
• Social media
• Promotional videos

Administration and Advice

Fully deductible:

• Gestor (tax representative)
• Accountant
• Tax advisor
• Lawyer
• Debt collection fees

PRO RATA DEDUCTIBLE EXPENSES

These expenses run throughout the entire year. If the property is only rented out for six months, generally only 50% of these expenses can be deducted.

Mortgage Interest

Only the interest paid on the mortgage is deductible. The principal repayment of the mortgage is never deductible.

IBI (Municipal Property Tax)

The annual municipal property tax (IBI) is deductible on a pro rata basis.

Waste Collection Tax (Basura)

The municipal waste collection tax is also calculated pro rata.

Comunidad (Community Fees)

All community/HOA costs.

Examples:

• Elevator maintenance
• Swimming pool
• Gardening
• Concierge services
• Cleaning of common areas
• Security

Insurances

Including:

• Fire insurance
• Building insurance
• Public liability insurance
• Rental insurance

Utilities

When paid by the owner:

• Electricity
• Water
• Gas
• Internet

Alarm

All subscription costs for:

• Alarm system
• Security company
• CCTV/Camera surveillance

Bank Fees

Bank charges directly related to the rental activities.

Property Depreciation (Amortización)

This is one of the largest tax deductions. The Spanish tax authority allows you to depreciate a portion of the building's value each year.

Important: only the building structure is depreciated, never the land.

Furniture Depreciation

Durable furniture and appliances are also depreciated over time.

Examples:

• Beds
• Sofa
• Table
• Chairs
• Television
• Refrigerator
• Oven
• Dishwasher
• Washing machine

NON-DEDUCTIBLE EXPENSES

The following expenses generally cannot be immediately deducted:

• The purchase price of the property
• Mortgage principal repayments
• Notary fees at purchase
• Property Transfer Tax (ITP)
• VAT (IVA) on the purchase of a new build
• Structural extensions or major renovations that increase the property's value

PRACTICAL EXAMPLE 1

3-Bedroom Apartment in Marbella

• Purchase Price: €1,000,000
• Rental Period: 6 months
• Annual Rental Income: €60,000

Fully Deductible Expenses

Pro Rata Deductible Expenses

Result

• Rental Income: €60,000
• Total Deductible Expenses: €45,490
• Taxable Rental Income: €14,510

PRACTICAL EXAMPLE 2

5-Bedroom Villa in Estepona

• Purchase Price: €2,000,000
• Rental Period: 6 months
• Annual Rental Income: €150,000

Fully Deductible Expenses

Pro Rata Deductible Expenses

Result

• Rental Income: €150,000
• Total Deductible Expenses: €103,450
• Taxable Rental Income: €46,550

CONCLUSION

Anyone renting out their property on the Costa del Sol can significantly lower their taxable rental income by correctly deducting all legally permitted expenses.

In particular, property depreciation, mortgage interest, and costs directly associated with renting out the property can save thousands of euros in taxes each year.

Therefore, a correct tax return starts with a clear overview of all expenses and the careful storage of all invoices. This ensures you never pay more tax than is legally required.