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Can Rental Default Insurance Be Deducted on the Income Tax Return? A Guide for Property Owners in Spain

November 29, 2023

Investing in rental real estate is an attractive option for many property owners in Spain. However, there are risks associated with this activity, such as rental defaults. To protect against this situation, many property owners opt to take out rental default insurance. A common question among property owners is whether this insurance can be deducted on the income tax return.In this article, we will explore this issue and provide relevant information for those property owners interested in obtaining tax benefits.

What is Rental Default Insurance?

Rental default insurance is a policy that offers protection to the property owner in case the tenant fails to make rent payments. In situations of non-payment, the insurance can cover the monthly payments or even provide legal assistance if eviction proceedings need to be initiated. This insurance must be acquired by the property owner after a tenant profile assessment by the insurer.


Can I Deduct Rental Default Insurance from the Income Tax Return?

Taking out rental default insurance in the current times is highly advisable. Depending on the chosen policy, it also protects the property owner against vandalism or theft by the tenants and offers legal assistance, if needed.

It is possible to deduct up to 100% of the total premium amount of the rental default insurance, offsetting it against the real estate capital income.

It's important to note that the deduction percentage may vary depending on the Autonomous Community to which the taxpayer belongs. The State Tax Administration Agency (AEAT) can provide updated information on the specific deductible percentage for each case.

To deduct rental default insurance, the process is quite simple. Firstly, the insurance must be contracted and the corresponding payment made. It is advisable to request a payment receipt from the insurance company and keep it in case of a possible tax inspection.

It is also necessary to inform oneself at the AEAT about the applicable deduction percentage in the corresponding Autonomous Community. Subsequently, inform your chosen advisor so that they include the deduction in the real estate capital income of the corresponding fiscal year, once provided with a copy of the insurance payment receipt.

In summary, the process is quite straightforward and is applied similarly to other deductible expenses. It is advisable to stay informed about current tax regulations and seek professional advice to ensure the correct application of the corresponding deductions.

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Possible Related Deductions

There are other aspects related to renting out homes that can offer tax benefits to property owners, some of which are as follows:

  • Non-state taxes and surcharges, as well as state taxes or surcharges that are not penal in nature (IBI, cleaning fees, garbage collection fees, and lighting fees).Premiums for insurance contracts linked to the home such as amortization insurance, home insurance, and even unemployment insurance.
  • Administration and management expenses: Expenses related to the administration and management of the rental, such as real estate agency fees or rental management or legal defense services, are deductible on the income tax return. It is important to keep the corresponding receipts and invoices as proof.
  • Mortgage interests: If the property owner has a mortgage on the rented property or has taken out a loan for property improvement, the paid interests can be deductible on the income tax return. However, it is necessary to meet certain requirements and limits established by law.
  • Property Amortization: The amortization of the property can be deductible, allowing property owners to recover the value of the property over time. However, this deduction is subject to certain conditions and restrictions.Final Recommendations

Final Recommendations

Considering that rental default insurance is deductible on the income tax return, it is essential to consider its contracting as a financial protection measure for property owners. The possibility of facing rental defaults and associated expenses can be significant, and adequate insurance can provide peace of mind and economic security.

Additionally, it is crucial to stay updated on the latest changes in tax legislation and seek advice from a qualified tax professional for precise and personalized guidance according to individual circumstances.


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