Rental income tax reductions for Spanish residents in 2026: the IRPF 60% reduction and when it applies

Spanish tax residents who let a property as a tenant’s main home can cut their taxable rental income by 60% under Art 23.2 of Ley 35/2006 (the LIRPF). The Ley 12/2023 restructured this into a 50-90% tier system for contracts from 26 May 2023, with pre-existing contracts grandfathered at 60% under Disposicion Transitoria 38. The IRAV rent update cap now limits how much landlords can raise rent each year, feeding through to the income base on which the reduction applies. Non-residents and Beckham Law taxpayers get no reduction at all.

What is the IRPF rental income reduction in Spain?

The IRPF rental income reduction, set out in Art 23.2 of Ley 35/2006, allows Spanish tax resident landlords to subtract a percentage of their net positive rental income before it enters the general taxable base. The reduction applies only when the property is rented as the tenant’s habitual residence (vivienda habitual), not for holiday lets, commercial premises or seasonal rentals. The reduced income is then taxed at the landlord’s marginal IRPF rate, which is progressive and starts at the lowest combined state and autonomous bracket.

The reduction sits on top of the expense deduction, not instead of it. A resident landlord first deducts all allowable expenses (mortgage interest, community fees, IBI, insurance, repairs, management fees and 3% amortization of the construction cost), calculates the net rental income, and then applies the percentage reduction to what remains. This two-stage structure is the central reason why resident landlords pay far less tax than non-residents on the same property. For the broader picture of how IRPF treats property income, see our guide to Spanish IRPF for property owners.

How does the 60% reduction work for contracts before 26 May 2023?

Contracts signed before 26 May 2023 are grandfathered at the original 60% reduction rate under Disposicion Transitoria 38 of the LIRPF, introduced by Ley 12/2023. The Agencia Tributaria confirms that these contracts continue to apply the 60% rate in the redaction in force at 31 December 2021 for as long as the tenancy continues on the same terms. The landlord does not need to take any action to keep the rate.

The practical effect is substantial. On EUR 9,350 of net rental income (a typical Costa del Sol apartment generating EUR 18,000 in annual rent after EUR 8,650 in deductible expenses), a 60% reduction leaves only EUR 3,740 taxable. A resident landlord with no other income pays the lowest marginal rate on that. A higher-bracket resident pays more, but the reduction still leaves them well below the non-resident alternatives discussed below.

What changed under Ley 12/2023 for new rental contracts?

The Ley 12/2023, in force from 26 May 2023, replaced the flat 60% reduction with a four-tier system for contracts from that date. The Agencia Tributaria sets out the new structure, which depends on the location and the tenant profile. The requirements must be met at the time the contract is signed and the reduction applies for as long as they continue to hold.

The four tiers are:

Tier	Reduction	Conditions
90%	90%	Stressed zone, new contract by same landlord, rent cut by more than 5% vs previous contract
70%	70%	Stressed zone, first-time rental to a tenant aged 18-35, or social housing let to a public body or non-profit
60%	60%	Property rehabilitated within the two years before the contract date
50%	50%	All other habitual-residence rentals

Stressed zones (zonas de mercado residencial tensionado) are declared by the Ministerio de Vivienda y Agenda Urbana under Art 18 of Ley 12/2023. As of 2026, 304 municipalities across four autonomous communities have been declared: Catalonia (per Resoluciones of March 2024, BOE-A-2024-5214, effective 16 March 2024 to 16 March 2027, and October 2024, BOE-A-2024-20576, effective 10 October 2024 to 10 October 2027), Navarra (21 municipalities including Pamplona and Tudela, per Resolucion of 28 July 2025, BOE-A-2025-15728, effective 30 July 2025 to 30 July 2028), Galicia (A Coruna, same Resolucion) and Pais Vasco (17 municipalities including Bilbao, Vitoria-Gasteiz and San Sebastian, per Resoluciones of January and April 2025, July and October 2025, and January and April 2026). No Andalusian municipality, including any Costa del Sol town, has been declared a stressed zone, so most new Costa del Sol contracts default to the 50% tier unless the property was recently rehabilitated. Contracts that breach Art 17.6 of the LAU (rent update limits) lose the reduction entirely, per the Agencia Tributaria guidance. For the tenancy law context, see our LAU guide.

The DGT binding ruling on the 90 per cent reduction

The DGT (Dirección General de Tributos) issued binding consultation V0540-25 on 28 March 2025, clarifying how the 90% tier is triggered in practice. The ruling confirms that the 90% reduction requires the new contract to cut rent by more than 5% against the previous contract’s rent after any annual update clause. Merely maintaining an already-reduced rent in a renewal does not meet the threshold. The landlord must make a fresh reduction at each contract renewal to keep claiming 90%. If the renewal holds the rent steady, the reduction drops to the 50% standard tier. This is a material compliance trap for landlords in stressed zones who assumed the 90% rate was permanent.

How does the 70% youth tier work in practice?

The 70% tier has two entry routes, both requiring a stressed zone designation. The first is a first-time rental (the landlord has not previously let the property) to a tenant aged between 18 and 35. The Agencia Tributaria confirms that where several tenants share a property, the 70% reduction applies only to the proportional share of net income corresponding to tenants who meet the age requirement. The second route is a let to a public administration or a non-profit entity under the Ley 49/2002 regime, with a monthly rent below the state housing aid programme threshold, or to house people in economic vulnerability under the Ley 19/2021 (ingreso minimo vital) framework.

For Costa del Sol landlords, the practical point is that neither route is available because no Andalusian municipality has been declared a stressed zone. A landlord in Marbella or Estepona letting to a 25-year-old first-time tenant qualifies only for the standard 50% reduction, not the 70% youth tier. The 70% rate is a meaningful tax incentive, but it is geographically locked to Catalonia, Navarra, Galicia (A Coruna) and Pais Vasco.

Can room rentals qualify for the IRPF reduction?

A 2025 DGT ruling opened the reduction to a previously ambiguous letting model. DGT binding consultation V0412-25 of 20 March 2025 confirmed that landlords who let rooms individually (rather than the whole property) can apply the 50% reduction under Art 23.2 LIRPF, provided each room is the tenant’s habitual residence. The DGT ruled that this activity does not constitute an economic activity (actividad economica) but remains rendimientos del capital inmobiliario, so the rental reduction framework applies. The 50% standard tier applies because room-by-room lets do not meet the stressed-zone or rehabilitation conditions for the higher tiers.

The habitual-residence requirement is the key condition. The tenant must use the room as their permanent home, provable through padron registration, contract duration and utility receipts. Tourist lets and seasonal room rentals remain excluded, consistent with the Agencia Tributaria’s long-standing position that temporary lets do not satisfy the permanent housing need. This ruling is significant for resident landlords with multi-bedroom properties in Costa del Sol towns like Fuengirola or Marbella, where room lets to long-term residents are common.

What expenses can a resident landlord deduct before applying the reduction?

A resident landlord deducts all expenses directly and inseparably linked to the rental before calculating net income, per Art 23.1 of the LIRPF and Art 14 of the Reglamento. The Agencia Tributaria manual lists the standard categories: mortgage interest on the property loan (capped at the rental income from that property), community fees (cuota de comunidad), IBI, building and contents insurance, repair and maintenance costs, and letting agent or management fees.

The most significant deduction is amortization. Under Art 23.1.b) of the LIRPF and Art 14 of the Reglamento, landlords can deduct 3% per year of the higher of the acquisition cost (excluding land value) or the cadastral value (excluding land value). The acquisition cost includes the purchase price, notary and registry fees, transfer tax and agency fees, but excludes the value of the land. When the land share is unknown, it is prorated using the cadastral split between land and construction. A December 2025 TEAC resolution confirmed that accumulated amortization cannot exceed the property’s acquisition cost.

For non-resident landlords, the deduction landscape is different and changing. EU and EEA residents can deduct the same expenses as residents under Art 24.6 of the LIRNR. Non-EU residents are taxed on gross income with no deductions under the statute, though the Audiencia Nacional ruling SAN 3630/2025 of 28 July 2025 (rec. 636/2021) held that denying non-EU residents expense deductions violates the free movement of capital (Art 63 TFEU) and the non-discrimination clause in the Spain-US DTA (Art 25). The State Attorney has appealed to the Supreme Court, so the position is not yet final. See our non-resident rental income tax guide for the full IRNR treatment.

How does the IRAV rent update cap interact with the rental reduction?

The IRAV (Indice de Referencia de Arrendamientos de Vivienda), introduced by Ley 12/2023 and published monthly by the INE, caps annual rent increases for contracts signed after 26 May 2023. The IRAV is structurally lower than general inflation because it combines CPI, core CPI and a moderating coefficient. For May 2026 the IRAV stood at 2.48% (INE), while the general CPI was 3.20% (Ministerio de Vivienda y Agenda Urbana). The INE publishes the figure monthly around the 12th to 15th of the following month.

The interaction with the rental reduction is indirect but material. The IRAV limits the landlord’s ability to raise rent, which constrains the gross rental income that flows into the net income calculation. Lower gross income means lower net income after expenses, and the percentage reduction (50% for most new Costa del Sol contracts) applies to that smaller base. A landlord on a pre-26 May 2023 contract can still update rent using the CPI clause in the original contract, preserving the higher 60% rate on a larger income base. A landlord on a post-Ley 12/2023 contract faces both a lower reduction tier (50% instead of 60%) and a slower-growing income base, compounding the tax gap between old and new contracts.

The Ministry of Vivienda y Agenda Urbana provides an official calculator for applying the IRAV to rent updates. For the full rent increase framework, see our rent increase rules guide.

How does the resident reduction compare to non-resident and Beckham Law taxation?

The comparison is the single biggest tax decision for a landlord who can choose their residency status. A full IRPF resident gets both expense deductions and the rental reduction, taxed at progressive marginal rates. A non-resident gets neither the reduction rights (for non-EU) nor any reduction, paying a flat rate on gross or net income. A Beckham Law taxpayer is treated as a non-resident for rental income purposes, so the Art 23.2 reduction does not apply.

The Agencia Tributaria confirms that Beckham Law taxpayers (Art 93 LIRPF, modified by Ley 28/2022) pay Non-Resident Income Tax on their Spanish-sourced income, filing Form 151. Rental income is taxed at 19% (EU/EEA origin) or 24% (non-EU), with no rental reduction available. The Ley 28/2022 reform expanded the regime to include teleworkers, entrepreneurs and qualifying family members, but the rental income treatment did not change: it remains within the IRNR framework. For a relocating professional who owns a rental property in Spain, the trade-off is material. The Beckham Law flat employment rate (24% on employment income up to EUR 600,000, per Art 93 LIRPF as modified by Ley 28/2022) saves tax on salary, but the loss of the IRPF rental reduction on investment property can offset that saving. A landlord with substantial rental income should model both paths: standard IRPF residency preserves the 50-60% reduction on net rental income, while the Beckham Law trades that reduction for the flat employment rate. The optimal choice depends on the ratio of employment income to rental income. For the residency decision itself, see our tax residency 183-day rule guide.

The table below shows the difference on EUR 18,000 of annual gross rent from a Costa del Sol apartment, with EUR 8,650 in deductible expenses (net income EUR 9,350):

Landlord status	Reduction	Taxable income	Rate	Tax due
Resident, 60% reduction (pre-26 May 2023)	60%	EUR 3,740	Marginal IRPF (lowest bracket)	Lowest of all
Resident, 50% reduction (standard new contract)	50%	EUR 4,675	Marginal IRPF (lowest bracket)	Low
Resident, 90% reduction (stressed zone, over 5% rent cut)	90%	EUR 935	Marginal IRPF (lowest bracket)	Lowest
EU non-resident (deducts expenses, no reduction)	0%	EUR 9,350	19% flat (IRNR)	EUR 1,777
Non-EU non-resident (gross tax, no deductions)	0%	EUR 18,000	24% flat (IRNR)	EUR 4,320
Beckham Law, EU origin (deducts expenses, no reduction)	0%	EUR 9,350	19% flat (IRNR)	EUR 1,777
Beckham Law, non-EU origin (no deductions)	0%	EUR 18,000	24% flat (IRNR)	EUR 4,320

A higher-bracket resident still pays far less than a non-EU non-resident because the reduction cuts the taxable base before the marginal rate applies. The reduction’s value compounds at every income level. For more on deductible expenses, see our rental tax deductions guide.

When does the rental reduction NOT apply?

The reduction does not apply in three clear situations. First, tourist and seasonal rentals are excluded entirely: the Agencia Tributaria states that tourist lets do not qualify for any reduction because they serve a temporary need rather than a permanent housing requirement. Second, the reduction only bites on net positive income: if expenses exceed rental income, no reduction applies, though the loss can be carried forward for four years against future positive rental income from the same property under Art 23.4 of the LIRPF. Third, contracts that breach Art 17.6 of the LAU lose the reduction.

The reduction also requires the income to be declared in a self-assessment (autoliquidacion) filed before any verification, limited inspection or full inspection covering those rental revenues has begun. Income regularized in such a procedure cannot benefit from the reduction, even if the landlord accepts the adjustment during the process. This is a compliance incentive to declare rental income correctly and promptly on the annual IRPF return (Modelo 100).