Regional Deduction Rules in Madrid

✓ verified by Cristina Gómez Torrens Senior International Accountant

Welcome to the Madrid Regional Deductions guide for the current fiscal year.  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.

Rental

If you have a rental agreement for your main residence, you can deduct 30% of the amounts paid, up to a limit of €1,237.20 annually, provided the deposit is lodged with IVIMA. You must also submit the ITP and AJD, which are subsidized in Madrid.

Rental Expenses

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.

Birth

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

International Adoption

A deduction of €721.70 per adopted child for international adoptions.

Foster Care of Minors

If you've fostered a minor for more than 183 days within the year, the deduction is €618. If the foster care lasted more than 90 days but less than 183 days, the deduction is €150. For the second and subsequent minors, the amounts are €773.25 and €927.90, respectively.

Unpaid Foster 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.

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.

Care for Children Under 3 Years Old: A 25% deduction on contributions to the Special System for Household Employees, up to €463.95 annually. For large families, the deduction is €500.

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

 If you are under 35 and registering for the first time in the census of entrepreneurs, you qualify for a deduction of €1,031.

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 Following Birth

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.

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Families with Two Children and Low Income

If you have two 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.

Interest on Home Loans for 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.

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.