Alberto Ríos bought an apartment in Benalmádena in 2022 for 240,000 € with a mortgage loan of 180,000 €. In 2024 he increased the mortgage by 30,000 €: 20,000 € went on refitting the apartment's kitchen and 10,000 € on buying a car. He lets it to tourists; in 2025 it was occupied for 146 nights. He pays the bank about 950 € a month and, when preparing his tax return, his first idea is to subtract the twelve payments: 11,400 €. What he can actually subtract is quite a lot less, and it is worth seeing why.
What is inside each payment
A loan payment mixes two things. One part is interest, the price of using the bank's money. The other is repayment of capital: giving back what was lent. Article 23.1.a).1.º of the IRPF Law (Spanish personal income tax) allows the deduction of "interest on borrowed capital invested in the acquisition or improvement" of the property and "other financing costs". It does not mention repaying capital, because paying back a debt is not a cost: it is cancelling a liability.
The bank's annual certificate for Alberto separates the 2025 figures:
| Item | Amount in 2025 | Deductible? |
|---|---|---|
| Interest | 6,300 € | Yes, for the linked and apportioned part |
| Capital repaid | 5,100 € | No |
| Home insurance required by the bank | 380 € | Yes, apportioned, as insurance on the property |
| Life insurance required by the bank | 420 € | No: it insures Alberto, not the property |
The home insurance fits article 13.f) of the Regulations, which refers to insurance premiums "on the assets" that produce the income. The life insurance does not cover the apartment, even though the bank imposed it as a condition of the loan.
What the money was used for
The mortgage security decides nothing. What the law looks at is where the money went: capital invested in acquiring or improving the asset that produces the income. That is why Alberto's top-up is split in two:
- The 20,000 € for the kitchen finance an improvement to the apartment: the interest on them is deductible.
- The 10,000 € for the car have nothing to do with the letting: the interest on them is not, even though it sits in the same mortgage and the same monthly payment.
If at the end of 2025 the outstanding debt is 200,000 € and 10,000 € of it relates to the car, a reasonable split leaves out 5 % of the interest. It is advisable to be able to prove where the money went with the deed for the top-up, the bank movements and the invoices for the works. Without that evidence, the tax authorities may dispute the whole of the top-up.
From the certificate to the return, step by step
Alberto let the flat for 146 of 365 days, 40 % of the year. The rest of the time his family used it or it was closed. Annual costs are only deducted for the part of the year in which the flat produced income:
- Total interest: 6,300 €.
- Part linked to the apartment (95 %): 5,985 €.
- Part of the year let (40 %): 2,394 €.
- Home insurance: 380 × 40 % = 152 €.
- Total deductible financing and insurance: 2,546 €.
Compared with the 11,400 € he intended to subtract, the difference is almost 9,000 €. The days of family use also generate imputed income; the mechanism is explained in days let and apportionment.
The costs of arranging the top-up, such as notary, registration or valuation fees, are also financing costs, with the same use and the same apportionment as the interest.
In Spanish the word is the same, amortización, and the concept is not. Amortising the loan means returning capital to the bank, and it is not deducted. Depreciating the property is the tax allowance for wear and tear on the building, the 3 % a year on the building value under article 14 of the Regulations, and it is deducted. What is more, when the flat is sold, that depreciation is subtracted from the acquisition value.
The ceiling that interest and repairs share
The same article 23.1.a).1.º adds a limit: interest and financing costs, added to repair and maintenance costs, cannot exceed for each property the gross income it produced. The excess is deducted in the following four years, with the same limit in each, under article 13.a) of the Regulations.
It affected Alberto in 2024. While the kitchen works were going on, the apartment was only let for 60 days and brought in 3,000 €. His attributable interest came to 1,000 € and a repair to the terrace to 2,500 €:
| Year | Gross income | Interest + repairs | Deducted | Carried forward |
|---|---|---|---|---|
| 2024 | 3,000 € | 3,500 € | 3,000 € | 500 € |
| 2025 | 11,000 € | 2,394 + 1,360 + 500 € carried forward | 4,254 € | 0 € |
In 2025 the repair of a leak in the bathroom, 3,400 €, goes in apportioned at 40 %: 1,360 €. With 11,000 € of income, there is room to spare under the ceiling and the 500 € from 2024 are absorbed. If 2025 had also been a bad year, the amount carried forward would still be available until 2028.
The limit does not reach the IBI (the annual municipal property tax), community fees, insurance or the depreciation of the property. Those costs are subtracted even if the result is negative.
The kitchen is depreciated, not deducted in one go
The 20,000 € for the kitchen are not a repair: the new kitchen improves the apartment. The Regulations expressly exclude from repair and maintenance amounts spent on "extension or improvement". That investment is added to the cost of the building and depreciated at 3 % a year: 600 € a year, which with the 2025 apportionment comes to 240 €. What is deductible from the first day is the interest on the money that financed it. The difference between works that are deducted and works that are depreciated is explained in what costs can I deduct.
If you would like us to review how your loan is split, you can send us the bank certificate, the deeds and the booking calendar through the holiday let form.
If you live outside Spain
A non-resident owner who lives in another European Union state, or in Iceland, Norway or Liechtenstein, can deduct the interest under these same rules in their Modelo 210, provided they can show its direct connection with the letting. Anyone who lives in any other country is taxed on gross income at 24 %, without subtracting interest or any other cost, subject to the outcome of the court dispute explained in can I deduct costs if I live outside the EU?.
The checklist before you file
- Ask the bank for the annual certificate with interest and capital shown separately.
- Gather the loan deed and the deed for each top-up, with the use made of the funds.
- Close off the calendar of nights let and of your own use.
- Separate repairs from improvements on each invoice.
- Note any excess carried forward from previous years and the year in which it expires.
- If there are co-owners, split the interest according to ownership of the property and of the debt; see owning the home half and half with your partner.
The deduction is not decided by the name on the bank statement. If the money was not invested in the property, the interest is not deductible even though the bank holds a mortgage over it; if it was invested, it is deductible even if the loan is a personal one. We cannot guarantee that the tax authorities will accept a split without documents to back it up.
The page on tax on tourist rentals brings together the owner's other obligations, from VAT to the platforms' information returns.