Renting out part of a property has become increasingly common in recent years. Many homeowners choose to let individual rooms, or even their entire property divided into separate rooms, as a way to share housing costs or make better use of their assets. What is less widely known is that, under certain conditions, these arrangements may qualify for the same 50% tax reduction that applies to full residential lettings.
What is the 50% reduction?
Spanish tax law grants a 50% reduction on the net rental income obtained from residential lettings. Once all allowable expenses have been deducted, only half of the remaining profit is subject to tax. This measure was designed to promote long-term rentals that satisfy genuine housing needs, rather than short-term or touristic accommodation.
For the reduction to apply, the rental must serve residential purposes and not form part of a business activity. The landlord must not employ anyone full-time to manage the rental, and the tenant must occupy the property as their main and permanent home.
This treatment extends to cases where the landlord rents individual rooms or separate parts of a dwelling under independent contracts, provided that each tenant uses the accommodation as their permanent residence. In these circumstances, each rental can benefit from the same reduction on its proportionate income.
It is also worth noting that, in certain cases, the percentage may be higher. Recent legislative updates introduced enhanced reductions of 60%, 70% or even 90%, depending on factors such as the property’s location in a designated high-demand area or a reduction in rent compared to a previous contract.
Residential, seasonal and holiday rentals
The distinction between rental types is fundamental for determining whether the reduction applies.
- A residential rental provides the tenant with long-term housing and qualifies for the 50% reduction.
- A seasonal rental relates to temporary accommodation, such as for students or workers on short assignments. These are treated as temporary arrangements and do not qualify.
- A holiday rental involves short stays for tourism or leisure purposes and is usually regarded as an economic activity, completely excluded from this relief.
Deductible expenses and proportional allocation
When only part of a property is rented, the landlord can deduct a proportional share of associated expenses. These may include property tax (IBI), community fees, home insurance, mortgage interest and utilities such as electricity, water and gas.
Because tenants typically share common areas like the kitchen, living room or bathroom, those spaces should also be included when calculating the appropriate proportion. For example, if a property is shared between the owner and one tenant, it is reasonable to attribute half of the common area to the tenant when determining deductible expenses. The same principle applies when several tenants rent different rooms under individual contracts.
Rentals of foreign properties
The 50% reduction is not limited to Spanish homes. It can also apply to foreign properties declared in Spain, as long as the landlord can demonstrate that:
- a valid rental contract exists for each tenancy;
- the property or room is used as the tenant’s main residence; and
- both income and expenses are properly supported by documentation.
When these conditions are met, the same reduction may be applied to income derived from foreign residential rentals.
Final thoughts
The 50% reduction for residential lettings remains one of the most valuable tax incentives for landlords. However, it only applies where the rental genuinely serves a long-term housing purpose and is properly documented.
The rental contract plays a decisive role in determining whether the arrangement qualifies as residential. Clauses referring to temporary or touristic use can easily invalidate the reduction, even when the practical use of the property appears residential.
Landlords who rent out rooms, or who let their entire property to different long-term tenants, should ensure that the contract clearly reflects the permanent nature of the tenancy and that income and expenses are accurately recorded. Understanding and applying these rules correctly can make a substantial difference in one’s annual tax position.
