Are you a property owner renting out an apartment or house and wondering how to report that rental income on your tax return? It's a common concern for those who receive rental income, and not knowing how to handle it correctly can lead to problems or even penalties from the tax authorities. But don’t worry! In this blog, we’ll explain everything you need to know, step by step, to properly file your rental income tax declaration. We’ll make fulfilling your tax obligations much easier than it seems. Keep reading to clear up all your doubts!

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Why is it important to file a rental income tax return?

Filing a rental income tax declaration is mandatory for any property owner who rents out their property. Reporting this income correctly to the tax authorities helps avoid penalties and ensures that you're complying with your fiscal responsibilities.

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Moreover, by filing this declaration, you can benefit from certain tax deductions that will reduce the total amount of taxes owed. It’s important to file the rental income tax return accurately and without errors to avoid unpleasant surprises like inspections or fines.

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What rental income should I report on my tax return?

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Full or partial rental of the property

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When filing your rental income tax return, it’s crucial to include all gross income received from renting out your property. This includes the monthly rent, any upfront payments, or even income from renting out just part of the property, such as a single room.

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Different types of rentals

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It’s important to distinguish between renting a primary residence and other types of rentals, such as commercial properties or vacation rentals, as the tax rules vary. If you're renting your property as a primary residence, you may be eligible for certain tax deductions that don’t apply to other rental types. Therefore, it’s essential to file the rental income tax declaration correctly based on how the property is used.

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Taxation of mid-term rentals

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In the case of temporary rentals, it’s important to note that these do not qualify as primary residences. As a result, you won’t be able to take advantage of the 60% reduction available for long-term rentals intended as permanent residences. The income you earn from this type of rental must be reported as real estate capital gains.

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Temporary rentals are treated similarly to vacation rentals, but without the specific requirements of the latter. You must report all income received from these rentals on your rental income tax return.

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Deductions for temporary rentals

Although you can't apply the 60% reduction, you are still entitled to deduct certain expenses related to the rented property. Some of the deductible expenses for temporary rentals include:

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- Repairs and maintenance: expenses you’ve incurred to maintain the property, such as minor repairs or upkeep, are deductible.

- Local taxes: property taxes (such as IBI) and other municipal fees associated with the property (like garbage collection fees) are also deductible.

- Utility expenses: if, as the property owner, you pay for utilities such as water, electricity, or gas during the tenant’s stay, you can deduct these costs in your rental income tax declaration.

- Intermediary fees: if you use a real estate agency to manage the rental, the service fees are deductible.

- Insurance: payments for insurance related to the property, such as homeowner’s insurance or liability insurance, are also deductible expenses.

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60% reduction for primary residence rentals

One key advantage when filing a rental income tax return for a primary residence is the ability to apply a 60% reduction on the positive net rental income. This means that, after deducting all allowable expenses from the rental income, you can further reduce your taxable base by applying this reduction.

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This reduction only applies to rentals intended for primary residences, so it’s not valid for vacation or commercial rentals. It’s important to consider this when filing your rental income tax return, as it can lead to significant tax savings.

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Steps to filing your rental income tax return

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To file your rental income tax declaration, follow these key steps:

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1. Fill out Annex D1: within the 100 tax return form, rental income must be included in the "Real estate capital gains" section.
2. Include total income: you must report all gross income received from renting out your property.
3. Apply deductible expenses: deduct all expenses related to the rental, such as repairs, taxes, and insurance.
4. Apply the 60% reduction (if applicable): if the rental is for a primary residence, don’t forget to apply the corresponding reduction.
5. Calculate net income: the result after deducting expenses and applying the reduction will be the net income, which is the amount subject to taxation.

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Filing your rental income tax declaration correctly is important to avoid problems with the tax authorities and to optimize your taxes as a property owner. By reporting all your rental income and taking advantage of available deductions and reductions, you can significantly lower your tax burden.

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Remember, fulfilling your tax obligations not only protects you from potential penalties, but it can also make the process of renting out your property much more financially rewarding. If you have any doubts about how to file your rental income tax return, it’s always a good idea to consult a tax advisor who can guide you through the process.

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