Knowing what the Return on Investment on your Spanish holiday rental is is just a matter of subtracting all costs from all income, right?
Actually, it's not. There's all kinds of costs that come with owning a Spanish airbnb. You have your utility costs, community fees, mortgage, furniture investments and more. Categorizing these costs is a must to be able to do a proper tax filing and to know what your actual ROI is.
This is how you do the math for you Spanish income tax
1) Deduction of costs for your Spanish income tax
Every year, owners of a holiday home in Spain need to file for income taxes. And there are ways to lower the income tax you owe to the Spanish tax authorities. These are called deductions.
Basically, costs can either be:
- Deducted pro rated
- Write-offs
- Fully deductible
By categorizing your costs it is easier to determine the right type of deduction.
2) Pro rated deduction
In Spain, costs that are deductible pro rated are costs for which the deductible amount depends on the number of days in the year your holiday rental was rented out.
For example, say you have 2000 euro in utility bills in one year and you rent out your holiday home for 150 days. Your deductible amount would be: 2000 euro x (150/365) = 842,70 euro.
3) Write-offs
For larger investments in the property—such as new furniture, the deduction type is a write-off. Which means that you need to deduct the costs over multiple years rather than all at once. This type of deduction is also known as “depreciation”
Furniture example:
Say you bought 10k euro worth of furniture in 2024. You can deduct 10% of that amount per year for 10 years. So your deductible amount for the furniture investment would be 1000 euro.
4) Fully deductible costs
Some costs you make are costs that you can directly relate to your bookings. For example cleaning costs for cleaning after a guest has left.
These type of costs are fully deductible for your Spanish income tax filing.
5) Cost categories
To know what type of deduction can be used, you should use categories (or ledgers) for your costs. For example you could use a ledger 'furniture' or a ledger 'utilities'.
AvenidaHQ has these ledgers and deduction rates built in. Just select the proper category for an invoice and you're all set. No need to become a tax expert yourself.