Regional Deduction Rules in Madrid

✓ verified by Elena Garro Accounting and Tax Specialist

Welcome to the Madrid Regional Deductions guide for 2026. Madrid offers a range of tax advantages that can enhance your income tax refund. Whether you're a student, parent, property renter, or investor, this guide provides essential insights into maximizing your tax benefits under the regional rules applicable in Madrid. From educational expenses, rental deductions, and family-related benefits to specific incentives for young entrepreneurs and investments in newly created entities, you'll find a variety of tax reliefs tailored to support different aspects of life and economic activity in Madrid. By understanding and utilizing these deductions, you can significantly reduce your tax liabilities and optimize your financial planning. Dive into the specifics and learn how you can benefit today.

What are the regional deductions in Madrid?

The tax benefits in Madrid known as regional deductions offer taxpayers a delightful discount on their taxes. These deductions are specifically tailored to the Personal Income Tax system of this autonomy. While the overall income tax return process is conducted nationwide in Spain, Madrid provides its residents with unique deductions. This is because the revenue from income taxes is divided between the state and individual communities. To qualify for these appealing deductions, residency in the specified territory during the previous year and meeting specific criteria are essential. 

Join Xolo simplifies the tax deduction process for freelancers in Spain and eliminates your administrative hassle for good.

Educational expenses 

You can deduct 15% of schooling costs, 15% of language tuition, and 5% of school uniform expenses. The annual deduction limit is €412.40 for language and uniform costs, €927.70 for private schooling, and €1,031 for children in the first cycle of preschool education.

The requirement for applying this deduction is that the sum of the taxable bases does not exceed the amount in euros resulting from multiplying by 30,930 the number of members of the family unit.

Rental (tenant deduction)

If you have a rental agreement for your main residence and you are under 40 years old, you can deduct 30% of the amounts paid, up to a limit of €1,237.20 annually. 

There are some requirements for applying this deduction:

• You must have the receipt for the deposit of the security deposit held at the Social Housing Agency of the Community of Madrid (IVIMA).
• The sum of the taxable bases cannot be higher than 26,414.22 euros in the individual taxation and 37,322.20 euros in the joint taxation. 
• Family unit: the sum of the general and savings tax bases of all members of the family unit of which the taxpayer may be a part may not exceed 61,860 euros.
• The amounts paid for rent must exceed 20% of the sum of the taxable bases.

Rental (landlord deduction)

• Deduction for expenses derived from the rental:
  You can deduct 10% of amounts paid for repair, contract formalization, insurance premiums for damages or non-payments, and obtaining energy efficiency certificates, with a maximum of €154.65.
• Deduction for leasing empty homes: 
  You can deduct 1,000 euros in the year you sign a rental contract as a landlord if your house has been empty for at least one year prior the sign of the contract. The rental agreement must be for at least three years and the tenant cannot bee your spouse or a relative, whether by blood or marriage, up to and including the third degree.
  
  

Birth or adoption

A deduction of €721.70 per child is available in the year of birth or adoption and the following two years.

If the child lives with both parents and they fill an individual declaration, the deduction will be prorated equally.

There are two limits for applying it:

• The sum of the taxable bases cannot be higher than €30,930 in the individual taxation and €37,322.20 in the joint taxation.
•  Family unit: the sum of the general and savings tax bases of all members of the family unit of which the taxpayer may be a part may not exceed 61,860 euros. 

International adoption

A deduction of €721.70 per adopted child in international adoptions. If the child lives with both adoptive parents, the amount of the deduction will be increased by 50% and will be apportioned equally between the tax returns of each parent if they opt for separate taxation.

Foster care of minors

If you've fostered a minor for more than 183 days within the year, the deduction is €618,6.
For the second and subsequent minors, the amounts are €773.25 and €927.90, respectively.

You must have the relevant certificate confirming that the child is in your care and the sum of the taxable bases cannot exceed 26,414.22 euros in the individual report and 37,322.20 euros in the joint one.

Unpaid care for elders or disabled

A deduction of €1,546.50 per person over 65 years or with a disability equal to or above 33% who lives with you for more than half of the year and that this person doesn't give rise to obtaining aid or subsidies of the Community of Madrid.

Limits for applying this deduction are 26,414.22 euros in the individual report and 37,322.20 euros in the joint one. 

Care for ancestors

If you care for an ancestor with a disability of 33% or higher, or aged over 65 years, you can deduct €515.50.

Donations to foundations and sports clubs

A 15% deduction on donations made, limited to 10% of your taxable base, to foundations (taht meet some requirements) that pursue cultural, welfare, educational or health purposes or any other purposes of a similar nature to these or amounts donated to basic and elementary sports clubs which must be reigstered in the Registry of Sports Associations of the Community of Madrid.

Care for dependants 

25% deduction on contributions to the Special System for Household Employees, up to €463.95 annually. For large families, the deduction is 40% up to €618,60. The deduction can be applied if:

• You have a child under 3 years old 
• Live with a relative (up to second degree of consanguinity) over 65 years old 
• Live with an ascendant, descendant, second-degree collateral relative, or spouse who has been recognized as having a degree of physical, mental or sensory disability equal to or greater than 33%

Acquisition of shares and participations in newly created entities

 A 40% deduction on amounts invested in the formation or capital increase of S.A or S.R.L, with a deduction limit of €9,279 annually. For S.A.L, S.R.L.L, or Cooperatives, as well as entities partnered with universities or research centers, the deduction is 50% up to €12,372 annually.

Promotion of self-employment for under 35s

You can qualify for a deduction of €1,031 if:

• You are under 35 years old
• It is your first year as an autonomo
• Your activity is mainly made in Madrid 
• You have to stay registered for at least one year

Acquisition of stock market shares

 A 20% deduction on investments made in capital increases of publicly traded companies, up to a maximum of €10,310 annually, provided your participation does not exceed 10%.

Acquisition of main residence due to birth or adoption

If you've bought a home upon having a child, you can deduct 10% of the amounts spent, up to an annual limit of €1,546.50. The requirements are:

• The house will be your main residence
• The purchase of the property must take place on or after 1 January 2023.
• The sum of the taxables bases does not exceed the amount in euros obtained by multiplying the number of members of the family unit by 30,930.

Discover how Xolo can simplify your tax planning and maximize your deductions in Madrid. Explore Xolo today and take the first step towards smarter financial management!

Families with two children and low income

If you have two or more children and your income bases are below €24,744, you can deduct 10% of the resulting amount corresponding to the full regional tax quota.

Interest on student loans for degree, masters, and PhD

A deduction is available for the interest paid on loans for higher education from Bachelor’s degree, Master’s degree and PhD.

Taxpayers wishing to claim the deduction must have specified the intended use of the funds in the loan or credit agreement they have entered into and must provide evidence of such use by means of the relevant supporting documents.

Interest on home loans for people under 30s

You can deduct 25% of the interest paid on a mortgage for your main residence, up to an annual limit of €1,031 if you are under 30 years old and have bought your main residence.

For investments from new taxpayers from abroad

You can deduct 20% of the acquisition value, including expenses and taxes inherent to said acquisition, excluding interest, of the securities representing the transfer of equity to third parties, whether traded on organized markets or not and securities representing equity participation in any type of entity, whether traded on organized markets or not. 

For obtaining the status of large family of general or special category

Two different deductions depending on the large family condition:

• Large family (general category): 50% of the full regional quota up to the maximum of €6,186 euros in individual taxation or €12,372 in joint taxation.
•  Large family (special category): 100% of the full regional quota up to the maximum of €12,372 in individual taxation or €24,744 in joint taxation. 

Due to the increase in the costs of external financing for investment in primary housing derived from the rise in interest rates

The amount of the deduction will be the result of applying 25% on the excess corresponding to the interest paid in the tax period, according to the specific conditions of the mortgage loan, on the interest that would have been paid if the aforementioned conditions had been applied in that fiscal year the Euribor corresponding to the month of December 2022.

The maximum limit of the deduction is 300 euros per year, both for individual and joint taxation. 

The requirements are:

• The house value is equal to or less than 390,000 euros.
• The mortgage loan has been arranged with a variable interest rate and before the start of the tax period.
• It is your habitual residence
• The sum of the taxable bases  does not exceed the amount in euros resulting from multiplying by 30,930 the number of members of said family unit.

Due to a change of residence to a municipality at risk of depopulation

1,000 euros, applicable in the tax period in which the change of residence occurs and in the following period if you are under 35 years old and have moved your habitual residence to a municipality with less than 2,500 residents. 

You have to maintain this residence for at least four years.

For the acquisition of habitual residence in municipalities at risk of depopulation

10% of the purchase price with a limit of 1,546.50 euros of homes acquired by taxpayers in municipalities in the Community of Madrid at risk of depopulation.

Take the hassle out of tax season with Xolo

At this point, you have a couple of options: 

1. Memorize all the information we've provided and file your tax return on your own, hoping everything goes smoothly. 
2. Gather your invoices for all of your deductible expenses as a freelancer, upload them to Xolo, and let our team of experts handle your VAT and income tax returns like the pros we are. 

Sign up to Xolo and let us help take the hassle out of tax season.