If you own a rental property, there is exciting news. A series of changes to the Housing Law, effective January 1 of this year, aims to boost deductions on the income statement from 2025 onward. The core goal is to encourage the rental of conventional housing and, in turn, help curb the steady rise in rental prices across the country.
What does this tax news contain?
Typically, owners of rental properties pay 50% of Personal Income Tax on rental income. The noteworthy part is that as the rent offered to tenants decreases, the tax advantages increase, amplifying the financial relief for landlords who participate in affordable housing programs.
Additional bonuses depending on the reduction in the rental price
If a landlord applies rent reductions in distressed areas, a measure defined by autonomous communities, a bonus of up to 70% on the income tax return may be available. This percentage applies when the tenant is a public or non-profit organization and the property is covered by a social rental scheme with rent below the state housing standard.
Moreover, if a landlord rents a home for the first time in a distressed area and the tenant is 18 to 35 years old or demonstrates a limited financial situation, the landlord can also claim up to 70% deduction on the income tax return for households with income below the IPREM benchmark.
Even more favorable is a scenario where renting in stressed areas at least 5% below market value yields a 90% reduction in personal income tax, for a lower amount than previously agreed in the prior lease. This change means landlords can retain more income while offering more affordable rents to tenants.
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Benefits of recent renovations
If renovations were completed within two years before the contract start, landlords can receive a premium of at least 60% on personal income tax, based on the level of income earned. This provides a strong incentive for owners to invest in improving rental properties.
In summary, amendments to the Housing Law introduce a range of opportunities for rental property owners. Tax reductions reaching up to 90% and enhanced bonuses for recent renovations make rental investments more attractive. These changes benefit landlords and can help stabilize or reduce rental price increases, offering hopeful news for the housing market. Owners should consider these provisions when planning their 2025 tax returns to maximize benefits.