What do I have to declare if I rent my holiday home?
The tax authorities have already announced that they will closely monitor the correct declaration of rental income. In this chapter, it will pay particular attention to holiday homes, i.e. to the taxation of beach apartments, holiday cottages or flats that are rented out to tourists on a seasonal basis. Its inclusion in the Income Tax Return has several points of interest that are necessary to know in order to do it correctly.
In this note we will deal with the most common case: a private individual or a couple of owners of a second home who rent for a few days, weeks or months without any professional activity in the hotel business.
This case includes the classic renting of an apartment on the beach, in the mountains, in the city, in a rural house, etc… from individual to individual.
The first thing to take into account when declaring is that two clearly different periods must be declared in the same fiscal year:
a) The period during which the dwelling is rented (the full income shall be declared and the expenses necessary for the rental may be deducted, but only in proportion to the days rented)
(b) The time that the dwelling is free and available to the owners (this will involve a rent charged by the Treasury for owning a second dwelling)
How do I declare the days I rent my home? Example
It is very important to clarify that not all the advantages of renting for permanent residence apply to these rentals and that compliance with the tax authorities does not exempt you from complying with the regulations of the Autonomous Community, which govern the requirements necessary to be able to rent a house for holiday purposes after the recent change in the law. It is necessary to know that each Autonomous Community has its own regulations to be able to rent a house and it is convenient to know them before renting a holiday home in order not to face possible sanctions.
Once you know that we are going to deal with the taxation of holiday homes without hotel and catering services, you should know that the days on which the home is rented must appear on the Income Tax Return as “income from property capital”.
The net yield to be taxed will be the result of subtracting from the total income the necessary expenses to obtain it. Specifically, you can subtract property tax, mortgage interest, rubbish collection fees, insurance to cover the risks of the property, community fees, costs incurred to obtain the rent, such as those of brokerage agencies or advertising, amortisation of the property or any other items in it, as long as they correspond to an effective depreciation, and even the costs of electricity, water, gas, etc.
However, not all the expenses can be charged in full, but only in proportion to the time the property has been rented. That is, if the property has been rented for a quarter of the year (3 months), we will have to divide all of these expenses by four. If it has been 30 days in total, then we can deduct one twelfth of the expenses and so on, depending on the period rented.
There is an exclusion at this point and it is the expenses of an intermediary agency or advertisements made to achieve the rent, which would be deductible in full.
Let’s look at an example of the calculation of the net yield of a holiday rental property that was rented in 2016 on the beach for 1,000 euros per month during the three summer months. The property had an acquisition cost of 120,000 euros, discounting the value of the land.
The above example is basic and other expenses could be added that are duly justified and directly related to the rent that is declared, for example if the services of electricity, water and gas are included in the rental price and therefore paid by the lessor, they would also be deductible, or the legal costs of advice and drafting of the contract, or some specific expense duly justified as the performance of a trip to sign the contract and hand over the keys.
Be careful with the amortization because it is a point that is usually forgotten but that supposes a remarkable saving. Amortization is considered to meet the effectiveness requirement when, in each year, it does not exceed the result of applying 3% on the amortization basis which is the greater of the following two values: the acquisition cost or the cadastral value.
It should be borne in mind that the deduction of interest and other financing costs as well as repair and maintenance costs is limited, at most, to the amount of the full income obtained from the transfer of each property or right (amount of the lease), and the excess that cannot be deducted in one year may be deducted in the following 4 years.