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Tax Expert Warns Rental Property Owners Missing Deductions on Income Tax Returns
Economist José María Páez warns that rental property owners commonly overpay taxes by declaring gross rental income without deducting eligible expenses. The most significant missed deduction is the 3% annual property depreciation allowance, which can reduce taxable income by €2,000–€5,000 per year but must be manually added to tax returns.
Quick Facts
Who
José María Páez
What
declaring gross rental income without deductions
When
annual tax returns
Where
Spain
- declaring gross rental income without deductions
- overpaying taxes
- missing property depreciation deduction
- calculating eligible expenses
- José María Páez
Economist José María Páez has highlighted a widespread mistake among rental property owners: many are paying more taxes than legally required by declaring gross rental income without applying eligible deductions. According to Páez, taxpayers should only declare the net profit after subtracting allowable expenses, a distinction that significantly impacts their tax liability.
The most commonly overlooked deduction is the 3% annual depreciation allowance calculated on the property's construction value, excluding land. This single deduction can reduce the taxable base by €2,000 to €5,000 annually, though it must be manually calculated and entered into the tax return, as it does not appear automatically in the draft forms provided by Spain's Tax Agency.
Beyond depreciation, property owners can deduct multiple categories of expenses including property tax (IBI), homeowners' association fees, and home insurance premiums. Additional deductible items include mortgage interest and interest on loans related to property acquisition or renovation, as well as maintenance and repair costs. Insurance deductions encompassing homeowner's insurance, rent default insurance, and liability coverage are also eligible, provided they are paid by the property owner rather than the tenant.
Páez emphasized that renovation and improvement works that increase property value cannot be deducted, distinguishing them from ordinary maintenance expenses. The economist stressed that this pattern of missed deductions represents the most frequent error among landlords when filing tax returns, and recommended that those who have never calculated their property depreciation begin doing so immediately to avoid overpaying taxes.
Why This Matters
Rental property owners can significantly reduce their tax liability by properly claiming eligible deductions—particularly the 3% annual depreciation allowance that many overlook. Understanding which expenses are deductible (depreciation, property tax, mortgage interest, maintenance) versus non-deductible (capital improvements) directly impacts annual tax bills, potentially saving thousands of euros. This guidance is essential for landlords filing tax returns and for those who may have underclaimed deductions in prior years.
Timeline & Sources
Jun 18, 2026
WireJosé María Páez publishes warning about common tax filing errors for rental property owners