Both types of rental have their pros and cons. These are the rental tax details that owners often ignore, as reported by the experts from the Housfy real estate platform.
Of all the differences between the different types of rental, it is worth highlighting the duration of the contract, the laws that govern them and the tax implications of each of them.
The rental of a habitual residence – that of a lifetime – is subject to the Urban Leasing Law (LAU) and aims to provide shelter to families permanently and indefinitely. It is possible to update rents each year, depending on the appropriate price index or specific regulations.
Regarding temporary rental, the Law frames it under the label “rental for use other than housing.” It gives more flexibility to both parties to establish their rules, but the duration is irreproachable:
It is possible to set rents more freely in each temporary rental contract – and always in accordance with market prices for this modality – but it is advisable not to forget its particularities:
The nature of both is exposed when the landlord reports to the Treasury. Let’s compare the two practices in the income tax return.
An owner who rents his property as a primary residence must declare the annual net rental income.
This means that you must add up all your gross income for the year and deduct all rental expenses from it. Although they may vary each year, the deductible expenses correspond to the following concepts:
With the new Housing Law, which passes on the real estate commission to the landlord, it will also be possible to deduct this expense from the total rental income.
As the apartment serves as the tenants’ habitual residence, the Treasury applies a 60% bonus on the net income before subjecting it to tax. Thus, the amount subject to personal income tax (and that would be added to the tax base, along with the salary) is only 40% of the net rental income.
These bonuses may be higher (and reach 90%) with the application of the Housing Law of 2023, if the conditions contemplated in this new rule are met.
These are, in summary, the points of the income tax return for an apartment for rent as a primary residence:
The owner who chooses to rent his apartment seasonally, and at higher prices, must declare the income from all contracts that occur during the same fiscal year.
The gross annual income from temporary rentals can easily outshine those from regular rentals. For example:
And all expenses related to the rental can also be deducted, just as before. It will be necessary to take into account, however, the expenses inherent to this modality. Let’s say:
Temporary rentals, on the other hand, do not qualify for any tax reduction, since the property does not constitute the tenants’ residence. Therefore, the owner is obliged to declare 100% of the annual net rental income.
The higher the amount to be taxed, the easier the calculation of personal income tax, which is progressive, will go through several sections. The amount to be paid in personal income tax can be triple that of the usual rent.
The Tax Agency also determines an allocation of income for the time that the apartment has been empty. This amount to be paid will depend on the cadastral value and the number of days that the property has been at the taxpayer’s disposal.
Let’s see broken down, as a summary, the income declaration aspects of temporary rental:
It is left to the reader’s judgment to choose which is more profitable, weighing the challenges of temporary rental and the facilities of regular rental. It is very common that, at the end of the day, there is not much difference between the annual net profits of one modality and the other and, if there is, it would be necessary to analyze how much they compensate depending on the situation.
