The real estate market in Spain has transformed by leaps and bounds, and more and more homeowners, for work, personal reasons, or simply to maximize their assets, are asking themselves: Can you rent your primary residence? It is a more common question than it seems and, as we will see, the answer is yes, but it is good to know all legal and tax implications before making a decision.
In these lines you will find a comprehensive and detailed guide with everything you need to know before renting out your primary residence. We analyze from the tax definition of habitual residence to the consequences on aid, mortgages, deductions and the obligation to registerThis way, you'll know if you can safely rent your home, avoiding penalties or losing important benefits.
What exactly is meant by habitual residence?
First of all, it is essential to understand what the administration considers as habitual residence. According to the criteria collected by the Tax Agency, it is the property that:
- It has been the taxpayer's permanent residence for at least a continuous period of three years (although there are justified exceptions for shorter periods, such as job changes, marriage, separation, first job, job transfer, or inadequate housing for people with disabilities).
- It must be effectively and permanently inhabited within a maximum period of 12 months from its acquisition. or the completion of the renovation works.
This definition is key, since Taxation and numerous economic benefits depend on the property maintaining its status as a primary residence.If you rent, it will cease to be so as soon as you move to another residence.
Can I rent out my usual residence under any circumstances?
In general terms, the Spanish law does not prohibit renting out one's habitual residenceAs an owner you have the right to rent out your property as long as meets the legal conditions of habitability and process all the necessary procedures. However, it is essential to keep in mind certain nuances that may affect your decision:
- The transition from a primary residence to a rental home may involve the loss of tax benefits or associated aid (for example, deductions in personal income tax, bonuses in transfer tax, reinvestment exemptions, etc.).
- The relationship between landlord and tenant must be reflected in writing by means of a leasing contract with all the necessary clauses.
- If the home is mortgaged, it's a good idea to review the contract and consult with the bank to avoid any potential restrictions (in practice, unless there are very specific clauses, there's usually no problem if you continue paying the installment).
- You change your registration to your new residence, since remaining registered in a rented home may result in a penalty for false registration.
- And of course, you will have the obligation to declare rental income in your income tax return as real estate income.
Each case has its own specifics, especially if you have received public aid, tax benefits, or have a mortgage associated with the property.
Tax consequences of renting out your primary residence
El biggest change when you stop living in your usual home and start renting it This occurs in the fiscal sphere. These are the most important implications:
- Loss of the deduction for the acquisition of a primary residence: If you purchased your home before January 1, 2013, and benefit from the personal income tax deduction, you will lose it as soon as you cease to reside there. The Tax Agency requires that it remain your primary residence to maintain this benefit.
- Rental Income Statement: Any income you receive must be declared as income from real estate capital in your personal income tax, and you will have to pay tax on it. If you hide this income or falsely declare that the property remains your primary residence, you risk severe penalties.
- Municipal capital gains tax if you sell the property shortly after renting it: If you sell a rented property within 5 years of purchase, you will have to pay municipal capital gains tax (Tax on the Increase in the Value of Urban Land).
- Loss of exemption for reinvestment in primary residence: If you claimed this exemption after selling your previous primary residence and invested in your current one, you will lose it if you rent before 3 years have passed.
- Loss of bonuses in the ITP: Many autonomous communities offer reduced tax rates for those under a certain age (35, 40, etc.) if the property is used as a primary residence. If you rent it out, you'll also lose these discounts.
It's important to keep in mind that any tax benefits or assistance granted for having primary residence status may be lost if you change the use and start renting the property.
Renting a newly purchased primary residence: Is it legal?
Many people wonder if it can rent the property as soon as you buy it. The legal answer is yes, but with very important nuances:
- There is no law that prohibits directly renting out your first home or newly acquired primary residence.
- The problem arises if you have benefited from tax deductions, bonuses, or exemptions for the purchase of your primary residence, whether state or regional: If you rent out your home before the minimum three-year residency period has elapsed, the Treasury may require you to repay all tax incentives received (deductions, refunds of reduced property tax, reinvestment exemptions, etc.), plus interest and a possible surcharge.
- If the house is of official protection (VPO)Remember that this is subject to additional restrictions and usually requires express authorization to rent. Renting without permission could result in significant fines and penalties.
So before you decide, It is essential to check all the conditions and requirements associated with your specific case. (purchase aid, mortgage, type of housing).
What happens with registration when I rent my usual residence?
When you move out of your usual home to rent it out, It is mandatory that you update your census and register at your new address.. Staying registered in a house in which you no longer live and which you also have rented is considered false registration, which can lead to penalties depending on the municipality. Fines range from 3 euros (small municipalities) to 150 euros (large towns). You can find more details about these requirements in our article on Complete guide for your first rental.
This often-forgotten procedure is essential to complete correctly to maintain legal security for both you and the tenant. This will help you avoid administrative issues or problems with access to public services.
What if my primary residence is mortgaged?
It's not uncommon to still be paying the mortgage on your primary residence when you decide to rent it out. In most cases, Banks do not put up direct obstacles as long as the payment obligations stipulated in the mortgage continue to be met. However, always check the signed conditions:
- Check if there are any specific clauses that prevent you from renting without the entity's prior consent.
- Keep in mind that when a mortgage is granted for a primary residence, the terms and percentage financed are usually more favorable, so changing the use could affect the bank if it detects the change.
- If you received a public guarantee (such as an ICO) specifically for the purchase of a first home, also review the regulations, as they may prevent you from renting in the first few years.
In any case, if there are no restrictions and you fulfill your obligations, You will be able to rent without major legal problems, although you will lose the possibility of applying the deduction for habitual residence in the Personal Income Tax.
Renting rooms within your primary residence: Is it possible?
Many owners choose to rent a room within your usual residence instead of the entire property. This practice is legal and allows you to share the space with tenants, generating additional income. For more information, you can consult our .
- Room rentals must also be formalized by a contract that specifies rights and obligations.
- It allows you to maintain your primary residence for tax purposes if you continue to live there.
- In the case of rented accommodation, a tenant may sublet a room. only with the express written consent of the ownerThis is usually regulated by a specific clause in the lease agreement.
Income from room rentals must also be declared to the Treasury, complying with tax requirements.
Can you rent your primary residence for short periods or as a tourist accommodation?
A frequent question is whether it is possible Rent by the day, week, or vacation on platforms like AirbnbThis type of lease is regulated differently in each autonomous community. Therefore:
- Short-term rentals can be considered a responsibility of the hotel sector and are subject to specific requirements (registrations, licenses, area restrictions, etc.).
- Some regions set specific limits (Madrid: maximum 5 nights, Canary Islands: only in areas without hotels, Valencian Community and Catalonia: mandatory registration of the property).
If you are considering this type of rental, Get well informed about regional and municipal regulations, since national regulations are not unique and penalties for non-compliance can be high.
Penalties and consequences of not declaring the rent
Finally, it is essential to remember that Not declaring the rent for your former habitual residence constitutes tax fraud.The Treasury has monitoring mechanisms in place, and if it detects irregularities, it will send you a parallel income tax return so you can regularize your situation, without applying the deductions to which you were entitled. Furthermore, they could open a disciplinary procedure against you.
- Penalties vary depending on the amount and circumstances, and can range from 50% to 100% of the amount defrauded, in addition to the return of any bonuses and tax benefits received.
- You will also lose the tax benefit of the reduction for renting a primary residence.
Therefore, it is essential to comply with all legal and tax obligations when renting a home that was your primary residence..
Finally, if you decide to proceed with the rental, follow these practical tips to ensure safe management:
- Record it in a rental agreement, preferably reviewed by a leasing expert.
- Update your registration to the new address before the tenant moves in.
- Tell your bank if you have a mortgage, especially if you have questions about conditions or benefits.
- Inform the Treasury about the change of use to avoid potential problems with deductions or exemptions.
- Consult the regional and municipal regulations if you consider short-term or tourist rentals.
- Consider purchasing rental insurance to protect you against non-payment or damages.
The legislation and taxation of renting a primary residence may seem complex, but with the right information, you can make informed decisions and avoid complications. It's always best to Consult with tax and real estate experts before acting, this way you will make the most of your property and comply with the law without risks.
