You are going to rent a house to students during the academic year, and you understand that in this case you will not be able to enjoy the 60% reduction in your personal income tax. Is there any alternative to avoid losing this incentive? How to enjoy the 60% reduction in personal income tax?
Different student housing rentals
Seasonal: When renting housing to students, it is common to agree to rent during the school year, from September to June (nine or ten months), formalizing a "seasonal rental". Attention! This can be detrimental to you:
- Even if the tenants occupy the property for most of the year, it is not considered that the primary purpose of the rental is to satisfy the permanent need for housing.
- This means a higher cost in your personal income tax, since the Treasury will not allow you to enjoy the 60% reduction on the net income from real estate capital in this tax.
Year-round: Well, to maintain this incentive, formalize a permanent rental of housing for the whole year. Note. So that the tenants do not object, agree on a lower monthly rent than in the case of a seasonal rental, or the same amount (if the students decide to leave the property in June, let them do so; the law allows the tenant to leave the property at any time if six months have passed since the beginning of the rental).
Deductible expenses when renting your home to students.
In addition, renting year-round housing has other advantages over seasonal rentals:
- The expenses that you assume derived from the ownership of the property (IBI, community of owners, amortizations, etc.) will be deductible in their totality, since, formally, the property is rented all year round.
- Also, unlike seasonal rentals, you will not be obliged to declare in your personal income tax an imputation of income for the months in which the property is vacant.
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Practical example of reduction of personal income tax on student housing rentals
Rent. Your home has a cadastral value of 80,000 euros (updated in 2001), and the annual expenses amount to 5,000 euros (1,000 for repairs and 4,000 for ownership expenses). Note. If you rent your property to students, see what your taxation will be depending on the type of contract:
- Seasonal: Contract from September to June for 1,200 euros per month (12,000 euros in total).
- Permanent: Contract for the whole year for 1,000 euros per month (12,000 euros in total).
| Concept | Season | Permanent |
|---|---|---|
| Income | 12.000 | 12.000 |
| Repairs | -1.000 | -1.000 |
| Ownership costs | -3.333 (1) | -4.000 |
| Net rental income | 7.667 | 7.000 |
| 60% reduction | 0 | -4.200 |
| Real estate capital | 7.667 | 2.800 |
| Income imputation (2) | 267 | 0 |
| Total Rdto. | 7.934 | 2.800 |
| Personal income tax cut (45%) | 3.570 | 1.260 |
(1) They are only deductible for the part of the year in which the property is rented: 4,000 x 10 months / 12 months.
(2) Cadastral value x 2% x 2 months / 12 months.
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Fraud of law?
In these cases, if the students who rent the housing change every year, so that the contracts are always for only one year and there are no extensions, the tax authorities could interpret that there is "fraud of law" and consider that the rental is really for a seasonal period.
Note. If this happens, argue that, upon signing a permanent lease, tenants have the right to extend it for up to three years. This is their unilateral decision. The fact that they do not exercise this right is not sufficient reason to consider that the lease is not permanent.
In order not to lose the right to this reduction, formalize a permanent rental contract instead of a seasonal rental. You will be able to deduct the totality of the expenses of ownership and you will not have to impute any income in your IRPF.