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Spain's 100% Income Tax Reduction for Landlords Who Cut the Rent by More Than 5%: The Exact Scale, When It Applies and What Happens If the Decree Is Not Ratified
Royal Decree-Law 29/2026 changes the IRPF (Spanish personal income tax) reduction for landlords who let homes: up to 100% if, when signing a new contract, they cut the rent by more than 5% compared with the last rent under the previous contract, and less if they keep it the same or raise it. As at 21 October 2026, we explain the exact scale band by band, from which signing date it applies, who is excluded, examples with a flat let at 1,000 euros a month and what happens if the decree is not ratified on 12 November.
"It's official": that is how the Spanish broadcaster COPE summed up, on 20 October, the new IRPF reduction for landlords who let their homes. The measure has been official since the BOE (Boletín Oficial del Estado, Spain's Official State Gazette) published Royal Decree-Law 29/2026 on 7 October 2026; it has applied since the 8th. What is not yet settled is its future: the decree must be ratified by the Diputación Permanente of the Congress of Deputies in a vote expected on 12 November, and the new scale only applies to contracts signed from 1 December 2026.
In this article, based on what is known as at 21 October 2026, we explain the exact scale as set out by the Agencia Tributaria in its official summary of the decree: the percentage for each case, what changes compared with the current rules, worked examples, who is excluded, when you will notice it in your tax return and what to do if your contract ends soon.
What has been approved and why it is described as "official"
On 6 October the Council of Ministers approved Royal Decree-Law 29/2026, on urgent measures to protect the social function of housing and expand the supply of affordable housing. Its article 6 amends the IRPF Law (Law 35/2006) and, among other things, rewrites the reduction for letting homes in article 23.2. The same scale was already in Royal Decree-Law 26/2026, which the Congress did not ratify on 2 October; the Government included it again in this new decree. On 7 October the Agencia Tributaria published a note and a document setting out the main tax changes.
…aimed at lowering rents, the residential use of housing and the stability of contracts.
Royal Decree-Law 29/2026, preamble (our translation)
What the reduction is and what it is applied to
The reduction does not apply to the rent you collect or to the tax you owe, but to your net rental income: what you collect in the year minus the expenses the law allows you to deduct, such as IBI (local property tax), community fees, insurance, mortgage interest, repairs or depreciation of the property. If the result is positive, the reduction takes off a percentage and only the remainder is taxed in your IRPF. At 100%, that rental income pays no IRPF; at 50%, half of it is taxed. It applies to residential lets, meaning the tenant's main home; not to temporary (seasonal) lets or holiday lets.
The new scale, band by band
The main case is that of a landlord who signs a new contract on a home they were already letting and who, at the time of signing, is not a gran tenedor (large-scale landlord). The initial rent under the new contract is compared with the last rent under the previous contract, after its annual update. Depending on whether you cut it, keep it or raise it, the reduction is as follows:
| Rent under the new contract | Condition | Reduction |
|---|---|---|
| Cut of more than 5% | With the same tenant, once the five-year minimum term or the last extension has ended; or with another tenant if the initial rent is below the applicable maximum price limit (reference index) | 100% |
| Cut of more than 5% | Home in a zona tensionada (stressed housing market area) and tenant aged 18 to 35 | 95% |
| Cut of more than 5% | Home in a zona tensionada | 90% |
| Cut of more than 5% | Tenant aged 18 to 35 | 85% |
| Cut of more than 5% | All other cases | 70% |
| Same rent or a cut of up to 5% | The initial rent does not exceed the last rent under the previous contract | 50% |
| Increase of up to 5% | Compared with the last rent under the previous contract | 40% |
| Increase of more than 5% and up to 10% | Compared with the last rent under the previous contract | 30% |
| Increase of more than 10% and up to 15% | Compared with the last rent under the previous contract | 25% |
| Increase of more than 15% and up to 20% | Compared with the last rent under the previous contract | 20% |
| Increase of more than 20% | Compared with the last rent under the previous contract | 15% |
Common requirement: the landlord must not be a gran tenedor at signing. If several cases apply, the highest percentage is used. Source: Agencia Tributaria, "Principales novedades tributarias introducidas por el Real Decreto-ley 29/2026", and Royal Decree-Law 29/2026 (BOE, 7-10-2026).
There is a separate scale for anyone letting a home for the first time who is also not a gran tenedor, plus some special cases that are kept or added. A tacit extension (prórroga tácita) is what happens when, at the end of the contract, neither party gives notice and the tenancy continues under article 10.1 of the LAU (Ley de Arrendamientos Urbanos, the Urban Leases Act):
| Case | Condition | Reduction |
|---|---|---|
| First let of the home | Initial rent below the maximum limit of the reference index | 100% |
| First let of the home | Zona tensionada and tenant aged 18 to 35 | 95% |
| First let of the home | Zona tensionada | 90% |
| First let of the home | Tenant aged 18 to 35 | 85% |
| First let of the home | Initial rent equal to or above the maximum limit of the index | 50% |
| Social rent | Tenant is a public administration or non-profit body that uses the home for social rent, or the home is in a public scheme with capped rent | 70% |
| Refurbished home | Refurbishment works completed in the two years before signing | 60% |
| Tacit extension (article 10.1 LAU) | Five-year minimum term completed after 1-12-2026, rent within the index limit and landlord not a gran tenedor during the extension | 80% |
Source: Agencia Tributaria, "Principales novedades tributarias introducidas por el Real Decreto-ley 29/2026" (October 2026).
Two important details for landlords in Madrid. Zonas tensionadas are declared by each autonomous community under the 2023 Housing Law, and as at 30 September 2026 no municipality in the Comunidad de Madrid (Madrid region) was on the BOE list, according to TaxDown; so, unless that changes, the 95% and 90% bands do not apply here. And the reference index limit is the one set by the national rental price index system published by the Ministry of Housing; it is wise to check with an adviser how that limit is worked out for a specific property before you set the rent.
Before and after: what changes depending on what you do with the rent
Today, contracts signed since 26 May 2023 follow the Housing Law scale: 90% if a new contract is signed in a zona tensionada with the rent cut by more than 5%; 70% for a first let in a zona tensionada to a tenant aged 18 to 35, or for social rent; 60% if the home was refurbished in the previous two years; and 50% in all other cases. Contracts signed before 26 May 2023 keep the long-standing 60%. This is how the most common cases change for a landlord who is not a gran tenedor:
| Situation | Current rules | New scale |
|---|---|---|
| New contract with the same tenant after the five years, cutting the rent by more than 5%, outside a zona tensionada | 50% | 100% |
| The same, in a zona tensionada | 90% | 100% |
| New tenant aged 18 to 35, rent more than 5% lower, above the index and outside a zona tensionada | 50% | 85% |
| New contract at the same rent | 50% | 50% |
| New contract raising the rent by 10% | 50% | 30% |
| New contract raising the rent by more than 20% | 50% | 15% |
| First let in a zona tensionada to a tenant aged 18 to 35 | 70% | 95% (100% if the rent is below the index) |
| Home refurbished in the previous two years | 60% | 60% |
Current rules: article 23.2 of Law 35/2006 as worded by Law 12/2023, for contracts signed since 26-5-2023. New scale: contracts signed from 1-12-2026, if the decree is ratified (see the exact date below).
When it applies: the 1 December detail
The Agencia Tributaria says the new scale applies to contracts "celebrados a partir de 1 de diciembre de 2026" (signed from 1 December 2026). At the same time, the thirty-eighth transitional provision of the IRPF Law, as worded by the decree, keeps the previous rules for contracts signed between the entry into force of the Housing Law, on 26 May 2023, "and 1 December 2026". Because 1 December appears in both phrases, a contract signed on exactly that day falls into a grey area. That is why some speak of contracts signed "before 1 December" and others of contracts signed from the 2nd.
Contracts already running do not change regime: they keep the percentage that applied when they were signed. The exception is the tacit extension: where a contract's five-year minimum term ends after 1 December 2026 and the tenancy continues by tacit extension, the decree provides for an 80% reduction during the extension, provided the rent does not exceed the index limit and the landlord is not a gran tenedor.
Examples with a flat let at 1,000 euros a month
Take a flat let at 1,000 euros a month (12,000 euros a year), with 3,000 euros a year of deductible expenses, and a landlord who is not a gran tenedor and pays tax at a marginal rate of 30%. That rate is only an example: yours depends on your income and your autonomous community. The previous contract ends after five years and a new one is signed:
| Scenario | Net rental income | Reduction | IRPF on the rent (30%) | Left after expenses and IRPF |
|---|---|---|---|---|
| You keep €1,000/month | €9,000 | 50% | €1,350 | €7,650 |
| You cut to €940/month (-6%) with the same tenant, under the new scale | €8,280 | 100% | €0 | €8,280 |
| You cut to €940/month under the current rules, outside a zona tensionada | €8,280 | 50% | €1,242 | €7,038 |
| New 30-year-old tenant at €940/month, above the index, outside a zona tensionada | €8,280 | 85% | €372.60 | €7,907.40 |
| You raise to €1,100/month (+10%), under the new scale | €10,200 | 30% | €2,142 | €8,058 |
Our own simplified calculation: same expenses in every case, no other income or deductions. The IRPF shown is the tax on the rental income at the example's marginal rate.
In this example, cutting the rent by 6% under the new scale leaves the landlord 630 euros a year better off than keeping it (8,280 against 7,650) and 222 euros better off than raising it by 10% (8,058). With a lower marginal rate the advantage shrinks; with a higher one it grows. If the rent is cut well beyond 5%, the income given up can outweigh the tax saving, so it pays to run the numbers with your own figures. And remember that raising the rent has limits: in zonas tensionadas the law caps rents on new contracts and, until 31 December 2027, the annual update without agreement cannot exceed 2%.
Who is excluded
- Grandes tenedores (large-scale landlords): the scale for cutting, keeping or raising the rent, the first-let scale and the 80% for tacit extensions all require that you are not one. Under the Housing Law, a gran tenedor is anyone who owns more than ten urban residential properties or more than 1,500 square metres of built residential floor space, not counting garages or storage rooms; in zonas tensionadas the region can lower the threshold to five. The Agencia Tributaria's summary does not make clear whether any other percentage applies to them, such as those for social rent or refurbished homes.
- Contracts signed up to 1 December 2026: they keep the regime under which they were signed (50%, 60%, 70% or 90%, depending on the case, or 60% for those before May 2023).
- Lets that are not the tenant's main home, such as temporary (seasonal) lets or holiday lets.
- Income you do not declare and that the tax authorities later regularise in an inspection, and contracts that break the legal limits, for example if the tenant is charged the agency or contract-drafting fees.
- Any contract, if the decree is not ratified: the new scale would never apply.
When you will notice it in your tax return
There is no separate application: the reduction is applied in the IRPF return for the year in which you collect the rent. A contract signed in December 2026 only adds that month to the 2026 return, which is filed in spring 2027; the first full year under the new scale will be the 2027 return. Keep the previous contract, the receipts with the last updated rent, proof of the tenant's age if you use the young-tenant bands and, where relevant, the reference index check on the signing date.
What happens if the decree is not ratified on 12 November
If the Diputación Permanente does not ratify it, Royal Decree-Law 29/2026 is repealed from the moment the decision is published in the BOE. As the new scale only starts with December contracts, in that case it would never apply to any contract and the current rules would continue: 50% as a general rule plus the special percentages of the Housing Law. If it is ratified, the scale will apply to contracts from December onwards; the text could still change if it is later processed as a bill.
Views on the outcome differ. The Government presents the new reductions as a way to bring rents down and give contracts stability. According to Europa Press, on 2 October the PP, Vox, Junts and UPN voted against the previous decree, 26/2026, and in the Diputación Permanente the PP, Vox and Junts have 34 votes against 35 for the other groups, so the Government expects this decree to go through. As at 21 October 2026, 12 November is an expected date.
If your contract ends soon: what to do
- Note the end date and the last updated rent: that is the benchmark for working out whether you cut it by more than 5%, keep it or raise it.
- Check whether the five-year minimum term has already been completed: the 100% with the same tenant requires it.
- Run the numbers with your adviser using your net rental income and marginal rate, and compare cutting, keeping or raising the rent.
- If the new scale interests you, wait for the 12 November vote and sign the new contract from 2 December.
- Bear in mind the extraordinary extension in the same decree: a tenant who is up to date with payments can ask to extend, year by year and for up to two more years, main-home contracts ending before 31 December 2028; in that case there is no new contract.
- If you do not want to renew, check the notice periods with a lawyer, as they may change if Royal Decree-Law 28/2026 is ratified.
- Declare everything you collect: the reduction does not apply to income regularised by the tax authorities.
How we do it at Llavely
When cutting the rent can turn into a tax saving, what gives a landlord most peace of mind is knowing who they are signing with and having the contract properly documented. That is why Llavely is renting the other way round: tenants create their verified profile once, with their identity and income checked (if anything doesn’t add up, a member of our team reviews it), and it is landlords and agencies who invite them to view their property. It is free for tenants, landlords and agencies, with every feature; for tenants, it is always free.
To be honest: no platform decides which reduction you are entitled to or changes what the law says, and the new scale depends on the 12 November vote. What we do is make sure both sides start out with verified information. Rentals are already open in the provinces of Madrid and Barcelona: if you are looking for a flat, create your profile for free; if you are a landlord or an agency, list your property for free. You can paste the text of the listing you already have, and a member of our team checks every property in under 24 hours before it goes live. In the rest of Spain there is a waiting list: sign up with your areas and we will email you when we open there. And if you are thinking of selling a home in the Comunidad de Madrid, you can already do so with us for 2.5% + VAT, only if you sell, and request your free valuation.
Frequently asked questions
What is the 100% IRPF reduction for landlords in Spain?
It is the top percentage of the new reduction in Royal Decree-Law 29/2026 on net income from residential lets (what you collect minus deductible expenses). At 100%, that income is not taxed in the IRPF. It applies to landlords who are not grandes tenedores and sign a new contract at a rent more than 5% below the last rent under the previous one, either with the same tenant after the five-year minimum term or with another tenant if the rent is below the reference index limit.
From when does the new rental income tax reduction apply?
To contracts signed from 1 December 2026, according to the Agencia Tributaria, provided the decree is ratified. Because the transitional provision keeps the previous rules for contracts signed up to 1 December, the prudent course is to sign from 2 December if you want the new scale.
What reduction do I get if I keep or raise the rent?
If the rent under the new contract does not exceed the last rent under the previous one, 50%. If it rises, the reduction falls: 40% for an increase of up to 5%, 30% up to 10%, 25% up to 15%, 20% up to 20% and 15% if it rises by more than 20%.
Does it apply to my current rental contract?
No. Contracts signed up to 1 December 2026 keep the regime under which they were signed: generally 50% since 26 May 2023, with special rates of 60%, 70% or 90%, and 60% for those signed before that date. The exception is the tacit extension: if the five-year minimum term ends after 1 December 2026, the reduction will be 80% during the extension, with the rent within the index and the landlord not a gran tenedor.
What is a gran tenedor for the purposes of this reduction?
The decree refers to the 2023 Housing Law: a gran tenedor is anyone who owns more than ten urban residential properties or more than 1,500 square metres of built residential floor space, not counting garages or storage rooms. In zonas tensionadas, the autonomous community can lower the threshold to five properties. Grandes tenedores are excluded from the new scale.
Can landlords in Madrid get the 95% or 90%?
Those bands require the home to be in a zona tensionada. As at 30 September 2026, no municipality in the Comunidad de Madrid was on the BOE list, according to TaxDown. Unless that changes, landlords in Madrid can use the 100%, the 85% (tenant aged 18 to 35), the 70% and the other bands that do not depend on the area.
What happens to the reduction if the decree is not ratified?
Royal Decree-Law 29/2026 would be repealed from the publication of the decision in the BOE. Since the new scale only affects contracts signed from December, it would never apply and the current rules would continue, with a general 50%. The vote is expected on 12 November 2026.
When will I see the saving in my tax return?
The reduction is applied in the IRPF return for the year in which you collect the rent, with no separate application. A contract signed in December 2026 only counts that month in the 2026 return, filed in 2027; the first full year will be the 2027 return.
Sources
- Royal Decree-Law 29/2026, of 6 October, adopting urgent measures to protect the social function of housing and expand the supply of affordable housing (BOE, 7 October 2026)
- Royal Decree-Law 29/2026, consolidated text in PDF (BOE, 7 October 2026)
- Main tax changes introduced by Royal Decree-Law 29/2026, of 6 October (Agencia Tributaria, October 2026)
- Fiscal and tax measures introduced by Royal Decree-Law 29/2026 (Agencia Tributaria, 7 October 2026)
- Royal Decree-Law 26/2026, tax section: comparative text of the IRPF Law (Primera Lectura Ediciones, 2026)
- Comparative table of the IRPF Law after Law 12/2023 on the right to housing (fiscal-impuestos.com)
- How the tax rules for rentals change: up to a 100% reduction for landlords (Economist & Jurist, 8 October 2026)
- Landlords who lower the rent on renewal will be able to apply a 100% IRPF reduction (Qué!, 19 October 2026)
- Tax changes for rentals: what changes and from when (OCU, 19 October 2026)
- Congress expects to vote on the housing decrees the day after the general strike and on the eve of the campaign (Europa Press via Infobae, 16 October 2026)
- Large-scale landlords: consequences of Law 12/2023 of 24 May on the right to housing (Sepín, 16 November 2023)
- Stressed housing market areas: what they are, where they are and how to tell if your home is in one (TaxDown, updated 13 October 2026)