Important Changes to IRPF for Rentals Starting in 2024

Recent changes in tax deductions for housing rentals in the personal income tax (IRPF), effective with the new Housing Law 12/2023 from January 1, 2024, are detailed below:

1. Tax Deductions for Housing Rentals in IRPF

The new Housing Law 12/2023 has changed the tax deductions applicable to rental income in IRPF, especially for contracts signed from January 1, 2024. Contracts until December 31, 2023, will enjoy a 60% reduction, while new contracts will be governed by the reduction regime established by the new law.

2. Modulation of Deductions on Income from Real Estate Capital

With the entry into force of the new law, tax incentives are introduced for renting primary residences at affordable prices. This modulation affects the net income from renting a primary residence and will start to apply to contracts signed from May 26, 2023. The main changes include:

2.1 Increased Reduction of 90%

• Applicable when the same landlord formalizes a new rental contract in a tense residential market area.

• Requires an initial reduction of more than 5% compared to the last contract, after applying the annual update.

Note: It is advisable to take advantage of this reduction if the property is in a tense area, as it can mean significant savings in IRPF.

2.2 Increased Reduction of 70%

• Applicable when the taxpayer rents a house for the first time in a tense area and the tenant is between 18 and 35 years old.
• Also applicable when the tenant is a public administration or a non-profit entity that uses the property for social renting or housing economically vulnerable people.

2.3 Increased Reduction of 60%

• Applicable in cases of rehabilitation works carried out in the two years prior to the formalization of the rental contract.

Note: The reduction percentages are incompatible with each other and the requirements must be met at the time of signing the contract.

3. Transitional Regime

A transitional provision is established to regulate a 60% reduction in positive net capital gains from real estate derived from rental contracts signed before May 26, 2023. This offers a transitional framework for contracts prior to the new law.

The new Housing Law introduces significant changes in tax deductions for housing rentals, with the aim of promoting affordable renting and encouraging the rehabilitation of housing. It is essential for taxpayers to stay informed about these changes to make informed fiscal decisions.