If you rent out your property for mid-term stays (contracts from 1 to 11 months for students, relocated professionals, etc.), Spanish income tax (IRPF) allows you to deduct a significant portion of associated costs. The key is knowing which expenses qualify, which do not, and how to justify them to the Tax Agency. This updated guide is designed for property owners with seasonal contracts and explains, clearly, the points that the Spanish Tax Agency reviews and the nuances that apply to this type of rental.‍

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What we mean by “mid-term stay” and why it matters
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In practice, a mid-term stay is formalized as a seasonal rental, which is a contract for use other than as a primary residence under the Spanish Urban Leases Act (LAU). This affects the reduction of net rental income for IRPF purposes, as the Tax Agency only grants it when the rental is used as the tenant’s primary residence. For tourist rentals, this reduction does not apply.

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For seasonal contracts, whether you can apply the reduction depends on whether you can prove that the property was genuinely used as the tenant’s home. If not, you can only deduct expenses but not apply the income reduction.

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Expenses you can deduct
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The law allows you to deduct expenses necessary to obtain rental income and depreciation, always prorated for the period the property is rented out. These include:

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• Mortgage interest and other financing costs.
• Repairs and maintenance, such as painting, boiler repairs, or replacing appliances.
• Taxes such as property tax (IBI) or municipal fees related to the property.
• Administration fees, agency or management services, contract formalization costs, and legal defense.
• Insurance policies related to the property, such as home or liability insurance.
• Utilities (electricity, water, gas, internet) if paid by the landlord.
• Cleaning and other services paid directly by the owner.
• Bad debts, when at least six months have passed without payment and there is proper justification.
• Depreciation of the property and of the furniture provided, applying the percentages set by law.

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Limits and carryovers
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There is a combined limit for interest and repair expenses, which cannot exceed the total rental income from the property in that year. If expenses exceed that amount, the excess can be deducted over the next four tax years. All amounts must be prorated based on the actual rental period, including depreciation.

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Non-deductible expenses
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Expenses that are not deductible include improvements or extensions (which must be added to the depreciable value instead), fines and penalties, and any personal expenses not directly related to the rental or without an invoice.

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Net rental income reduction
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For contracts signed from May 26, 2023 onward, the reduction can be 90%, 70%, 60%, or 50%, depending on factors such as whether the property is in a “stressed area,” the tenant’s age, whether it’s the first time the property is being rented, or if it has recently been renovated.

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For mid-term rentals, you can only apply this reduction if you can prove that the property served as the tenant’s residence during that period. Otherwise, it will be considered a temporary rental and the reduction will not apply.

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VAT and transfer tax (ITP) in mid-term rentals

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If the rental is for residential purposes, it is exempt from VAT, but the tenant must pay the Transfer Tax (ITP) according to their autonomous community’s regulations. If the rental includes hotel-like services such as periodic cleaning or reception, reduced VAT (10%) applies. If the property is rented to a company for subleasing, VAT is charged at 21%.

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How to document it for acceptance by the Tax Agency
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The contract must clearly state the intended use of the property and, in the case of seasonal rentals, describe the reason and duration of the stay. It is advisable to collect proof such as tenant registration in the municipal census, university enrollment, or an employment contract.

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Invoices must be in the owner’s name and payments traceable. It is also important to keep a record of the days the property is rented to calculate the deductible portion and to document collection efforts in the case of unpaid rent.

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Common mistakes
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Frequent errors include confusing repairs with improvements and losing the deduction for the year, forgetting the interest and repair expense limit with its four-year carryover, and applying income reductions to tourist or seasonal rentals without proving that the use was residential.

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Quick decision guide
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If you can prove that the property served as the tenant’s residence, you can apply the net rental income reduction and deduct expenses. If not, you’ll be limited to deducting only the permitted expenses. In all cases, the key is accurate calculation, keeping invoices, and respecting legal limits.