Do you feel like you’re paying more taxes than you should on your vacation rental? Many owners on the Costa del Sol don’t know how to optimize the taxation of their holiday apartments, losing hundreds or thousands of euros each year by not applying deductions correctly. In addition, recent changes in tax interpretation, such as the 2025 Canary Islands High Court ruling, introduce important nuances that can affect how you are taxed. Making the most of your deductible expenses not only helps you pay what’s fair, but in expert hands can become a lever to improve your profitability. At 1Mast we show you how to turn that tax savings into real value, combined with a tailored real estate strategy for Fuengirola, Mijas and the rest of the Costa del Sol.
Do you report as real estate income or as an economic activity?
The first step to applying deductions correctly is knowing under which regime you report on the IRPF: as real estate income or as an economic activity. The distinction is key and depends, fundamentally, on the additional services you offer to tenants:
- If the vacation rental includes hospitality-style services—such as frequent cleaning during the stay, periodic changing of bed linen and towels, reception or personalized attention—the Tax Agency may consider you operate as an economic activity. In that case, expense deduction can be total and you don’t need to prorate many items.
- If you only rent the property and provide some minimal services, in most cases you report as real estate income. Here, most expenses must be prorated according to the days rented out of 365 and personal use is very limited.
Review your case in detail to know which tax regime applies to you; the amounts you can deduct and the level of tax control required depend on it.
Golden rule and common mistakes when deducting
Deducting expenses on a vacation rental may seem straightforward, but many owners fall into frequent mistakes that cost them money and peace of mind in potential audits. Always apply the golden rule of proration when you report as real estate income:
- Proration: You can only deduct the proportional part of expenses based on the days rented over 365. For example, if you rented 120 days, prorate: 120/365 = 32.9% of annual expenses.
- Invoices: It is essential to keep full invoices in the owner’s name. Simple receipts are not sufficient.
- Distinguish repair from improvement: Repairs (painting, fixes, replacement due to breakdown) are deductible; improvements (adding a pool, full renovation) are not deductible as an expense but through amortization.
- Avoid disguised personal use: If you occupied the property some days, those cannot be counted as deductible.
Mini checklist for optimal tax deduction:
- Rental days correctly recorded and supported by contracts or bookings
- Invoices organized and in the landlord’s name
- Defined tax regime
- Annual amortizations correctly calculated
Which expenses can be deducted and how to apply them
Utilities and services
Utilities like water, electricity, gas, internet or cleaning can be deducted in proportion to the days rented, unless you report as an economic activity (in which case it can be 100%).
Simple formula: Total annual expense × (days rented / 365).
Quick example: If you paid €1,200 for electricity and rented 180 days, you deduct: 1,200 × (180/365) = €591.
Maintenance and repairs
You can deduct all necessary repairs (plumbing, painting, appliance repairs) made to keep the property in optimal usable condition.
- Deductible: Fixing a leak, replacing a broken appliance with a similar one.
- Not immediately deductible as an expense: Upgrades like enlarging a bathroom or adding air conditioning (these are included via amortization).
Insurance and municipal taxes
IBI, garbage fee, home insurance and liability insurance are deductible proportionally to the days rented, unless it’s an economic activity (then, 100%). In areas like Fuengirola or Mijas, there may be local fiscal particularities — at 1Mast we help you identify them to leverage every advantage while avoiding common mistakes.
Amortizations
The value of the property and furniture can be amortized each year as an expense:
- 3% annually on the higher of purchase price or cadastral value (excluding the land) for the property.
- 10% annually for furniture and appliances.
- Remember: you must be able to substantiate these values with deeds or invoices
Example: Apartment valued (excluding land) at €200,000 → 3% = €6,000 deductible annually, prorated if not rented the entire year.
Commissions and management
Commissions paid to agencies, platforms (like Airbnb or Booking) and tax advisors are 100% deductible as long as they are properly documented and directly related to the rental. Our advice from 1Mast: use efficient channels and demand clear invoices to justify each expense before the Tax Agency.
External services and promotion
Cleaning costs (even between rentals), gardening, advertising on portals, software management or booking automation are deductible. However, if you regularly outsource services with fixed staff, you might shift from real estate income to economic activity, which requires a special analysis.
How 1Mast amplifies that savings: hold, improve, or sell
Optimizing deductible expenses means tax savings you can reinvest strategically into your vacation property. At 1Mast we help you turn that savings into greater real profitability with three approaches depending on your goal:
- Hold the property: We advise on improvements that are fiscally deductible and that increase value or occupancy, maximizing net annual benefit.
- Enhance to revalue: We guide you on which renovations can boost market value, helping you plan amortizations and leverage deductions ahead of a potential sale.
- Sell: If you decide to exit the vacation rental market, our hybrid agency model with a commission from 1% and local domain expertise in Fuengirola and Mijas allows you to maximize proceeds on the sale, combining tax savings with our price optimization and marketing.
Are you an owner? Do you want to turn tax savings into better returns for your vacation rental or evaluate a smart sale? At 1Mast, real estate in Fuengirola, Mijas and the Costa del Sol, we help you analyze your case, optimize your deductions, and make the best real estate decision on the Costa del Sol.