Filing your annual tax return is a yearly obligation for all taxpayers in Spain, but it’s also a great opportunity to reduce the amount you owe to the Tax Agency. Among the various tax-saving options, state deductions play a key role. If you’re not taking advantage of all the deductions you’re entitled to, you could be missing out on a valuable opportunity to lower your tax burden. In this article, we’ll explore some of the most common state deductions and how you can make the most of them to optimise your tax return.
What are State Deductions?
State deductions are tax benefits established by the Spanish Tax Agency that allow you to reduce your taxable income. This, in turn, decreases the amount of tax you have to pay. These deductions are linked to various personal or family situations, such as mortgage payments, maternity, donations to NGOs, and more.
It is essential to know about them to ensure you don’t miss out on any benefits. Below, we explain some of the most notable deductions.
Deduction for Investment in Main Residence
This is one of the most relevant state deductions in the tax return. Although it was eliminated for purchases made after 2013, those who bought their home before that date can still benefit from it. This deduction allows you to deduct a percentage of the amounts invested in the purchase and rehabilitation of your main residence. The deductible base depends on the taxpayer’s income and whether they are in a region with complementary regional regulations.
Example: If you bought your home before 2013, you can deduct up to 15% of the amounts invested, with a limit of €9,040 annually.
Maternity Deduction
Another one of the state deductions that can benefit many families is the maternity deduction. This deduction is aimed at working mothers, who can deduct up to €1,200 annually for each child under 3 years old. This benefit is applicable even if the mother is a freelancer.
Example: If you are a mother and are a salaried employee or a freelancer, you can receive a deduction of €100 per month for the first three years of your child’s life.
Deduction for Donations to NGOs
The deduction for donations is another common deduction in the tax return. If you make donations to non-profit organisations, you can benefit from a discount on your IRPF. The deduction percentage varies depending on the type of organisation and the amount donated. The deductions can be as high as 80% for the first contributions of up to €250.
Example: If you have donated €300 to an NGO, you can deduct 80% of the first €250 and 40% of the remainder. This means you could reduce your taxable income by up to €220.
Deduction for Investment in Newly Created Businesses
A lesser-known but very beneficial deduction for those who invest in new projects is the deduction for investment in newly created businesses. This tax incentive allows taxpayers to deduct up to 50% of the amounts invested in a new business, with a limit of €100,000 annually.
Example: If you invest €20,000 in a new company, you could deduct €10,000 on your tax return.
How to Make the Most of State Deductions
To maximise your state deductions, it is essential to know all the options you are entitled to and to organise your tax return properly. Here are some practical tips:
- Review your expenses and deductions: Inventory all the possible deductions you can apply for, such as those related to housing, maternity, or donations.
- Keep all necessary documentation: Make sure you have the corresponding invoices and receipts for the deductions you will apply. This includes, for example, receipts for donations or mortgage payments.
- Consult with a tax advisor: If you have questions about how to apply deductions or if you think you might have overlooked something, it is best to consult with a tax advisor.
Frequently Asked Questions (FAQs)
Can I apply multiple deductions in the same tax return? Yes, you can apply multiple state deductions in your return, as long as you meet the established requirements for each one.
How do I know if I am eligible for the housing investment deduction? If you bought your home before 2013 and made the investment in it before that date, you can apply this deduction. Check the established limits based on your taxable income.
What documentation do I need for donations? You must have the donation receipt issued by the recipient organisation, which must be registered as an NGO or a non-profit entity
Making the most of your state deductions is an excellent way to optimise your tax return and reduce the money you owe. Make sure you know the deductions available and meet the necessary requirements to benefit from them. Don’t miss out on the opportunity to lower your tax burden.
If you need personalized assistance, at Entre Trámites we offer management and tax advisory services for freelancers and SMEs. You can contact us through this contact form for us to call you, or if you prefer, you can schedule a free consultation or write to us on WhatsApp.
