Fiscal benefits
If you live in the Community of Madrid you will enjoy the following tax benefits
Income tax reduction
Madrid was the first Community to approve a reduction in personal income tax that benefits the lowest incomes.
Since 2018, the rate applicable to first stretch of the regional scale (payable bases up to 12.450 euros), it has been placed in the 9 percent (compared to 9,5 percent established in the State scale)
In 2022 he entered in force a new reduction of 0,5 percentage points in all sections of the regional scale.
With this reform, the minimum rate is set at 8,5 percent for payable bases up to 12.450 euros.
In the second tranche, up to 17.707,20 euros, the rate stands at 10,70 percent (compared to 12 percent set by the State).
The reduction benefits all taxpayers of the tax that obtain income from work, but mainly to the lowest income, since almost half of Madrid taxpayers have earned income of less than 17.707,20 euros and almost a third of the total are less than 12.450 euros.
As a result of the rise in prices, the rate has been deflated in all its sections by 4,1 percent, which is equivalent to the percentage equivalent to the average salary increase for the second quarter of 100 of the National Institute of Statistics.
In this way, it is achieved that the rise in prices and wages does not lead to an increase in the amount supported by personal income tax.
The deflation affects all sections, in such a way that the rate applicable already in 2022 is the following:
| Liquidable basis | full fee | Other Liquidable Base | Applicable type |
| up to euros | euros | up to euros | Percentage |
| 0 | 0 | 12.960,45 | 8,50% |
| 12.960,00 | 1.101,64 | 5.472,75 | 10,70% |
| 18.433,20 | 1.687,22 | 15.927,30 | 12,80% |
| 34.360,20 | 3.725,91 | 21.236,40 | 17,40% |
| 55.596,90 | 7.421,04 | onwards | 20,50% |
The deductions that we now detail you can apply in the 2023 INCOME, which will be carried out between the months of April and June 2024.
La 3 / 2023 Act of March 16 amends the Consolidated Text of Legal Provisions of the Community of Madrid in matters of transferred taxes, and establishes a series of measures in the IRPF for the promotion of the birth rate, reconciliation and emancipation, with effect from January 1, 2023.
NEW DEDUCTION FOR HOME PURCHASE DUE TO BIRTH OR ADOPTION
One of the main novelties of the Law is the inclusion of a deduction for those taxpayers who on the occasion of a birth or adoption acquire a habitual residence within three years after the birth or adoption.
The deduction will be 10% of the purchase price of the house, up to maximum of 1.500 euros per year, which will be prorated by tenths in the year of acquisition and in the following nine fiscal years, as long as the home is not transferred beforehand, a circumstance that would mean the loss of the right to deduction.
NEW DEDUCTION FOR OBTAINING LARGE FAMILY STATUS
Another of the most noteworthy innovations is the deduction of 50% in the full regional quota up to a limit of 6.000 euros in individual taxation or 12.000 euros in joint taxation for those taxpayers who obtain recognition as holders of a large family of general category, or in the case of large families de special category of the 100% of the full regional fee up to 12.000 euros in individual taxation or 24.000 jointly.
The deduction will be applicable in the period in which the recognition takes effect. and in the next two exercises. The limit to be entitled to the deduction will be the result of multiplying the number of members of the family unit for 30.000 euros.
NEW DEDUCTION FOR INTEREST DERIVED FROM MORTGAGE LOANS
A new deduction is established in favor of under 30 years, which will allow deducing the 25% of the interest paid in the loans obtained for the acquisition of habitual residence, with a limit of 1.000 euros per year.
DEDUCTION FOR BIRTH OR ADOPTION
The deduction is improved, which becomes 700 euros per born or adopted child in the period and in the following two, instead of the 600 euros previously provided.
The price is also improved up to 700 euros. increase applicable to the exercise of birth or adoption in the case of multiple births or adoptions.
This improvement will only have effects with respect to the children born or adopted on or after January 1, 2023.
DEDUCTION FOR INTERNATIONAL ADOPTION
As in the previous case, it is improved up to the 700 euros the deduction for international adoption for each adopted child in the tax period.
As a novelty, the norm establishes that when the adoptee lives with both adoptive parents, the amount of the deduction will increase by 50%.
HOME RENTAL DEDUCTION
The deduction limit for the rental of homes for persons under 35 years of age is improved, which goes from a limit of 1.000 euros to 1.200 euros per year.
DEDUCTION FOR CARE OF CHILDREN UNDER THREE YEARS OLD
The percentages and limits on the deduction for the Satisfied Social Security contributions by hired domestic workers, which until now was 20% up to 400 euros, and in the case of large families 30% up to 500 euros, and that with the approval of the Law it will be 25% up to 450 euros, and 40% up to 600 euros in the case of large families.
TEAMS
The rule also contains an equalization of minors linked by guardianship or foster care to children or descendants, an equalization that applies not only to personal income tax, but also to Patrimony, ITPAJD and Inheritances and Donations.
La Law 10/2023, of April 12 amends the Madrid Assigned Tax Law to incorporate additional measures to those adopted by the 3 / 2023 Act of March 16.
DEDUCTION FOR PARENT CARE
A new deduction is created $500 for those taxpayers who are entitled to apply the minimum by ascendants of personal income tax.
DEDUCTION FOR EXPENSES DERIVED FROM HOUSING RENTAL
Another of the new deductions is the one established in favor of taxpayers who have leased properties, who may deduct the 10% of expenses conservation or repair of the property, formalization of lease contracts, insurance premiums for damages and non-payments, energy efficiency certificates, all with a limit of 150 euros per year.
DEDUCTION FOR EDUCATIONAL EXPENSES
The concepts of expenses are unified schooling and language teaching on which a deduction may be applied 15% . Until now, only 15% was applied to school expenses. The 5% deduction for the acquisition of clothing for exclusive school use is maintained.
DEDUCTION FOR CARE OF CHILDREN UNDER THREE YEARS OF AGE, ELDERLY DEPENDENTS AND PEOPLE WITH DISABILITIES
The objective scope and the amounts of this deduction, previously limited to the care of children under three years of age, are extended.
The deduction is generally increased up to the 25% with the limit of 450 euros on the annual contributions to Social Security for hiring people under the special regime of Household Employees, while in the case of large families, the deduction increases to 40% with a limit of 600 euros.
To apply the deduction it will be necessary that the taxpayer performs an activity on their own account or on behalf of others, or failing that, receives a contributory pension and have at least one child under three years, or lives at least 183 days with ascending, descending or collateral up to the second degree over 65 years of age and who has a recognized degree of dependency, or who has a disability equal to or greater than 33%. It will also be applicable if the taxpayer himself has a recognized degree of dependency or disability equal to or greater than 33%.
DEDUCTION FOR THE PAYMENT OF INTEREST ON LOANS FOR UNDERGRADUATE, MASTER AND DOCTORATE STUDIES
Another novelty is the one established in favor of those taxpayers who have applied for a loan to study university, whether they were their own, their spouse or descendants who generate the minimum for descendants or who are paid annuities for food. A deduction equivalent to all the interest paid on your financing will be applied.
DEDUCTION FOR INVESTMENT IN THE ACQUISITION OF SHARES AND PARTICIPATIONS OF NEW OR RECENTLY CREATED ENTITIES
The amount of the deduction is improved, which becomes the 40% up to 9.000 euros. Previously it was limited to 30% with a limit of 6.000 euros.
Our public aid received by taxpayersIn general, they are taxed in the General Tax Base as "Other capital gains and losses that do not derive from the transfer of capital elements".
If you have doubts about the nature and taxation of such aid, you should contact the granting body.
Due to its importance, we inform you that Family benefits and aid received from any of the Public Administrations are exempt, whether related to birth, adoption, foster care or care of minor children. This is established in letter z) of article 7 of Law 35/2006 (IRPF Law).
For more information, you can access the following link of the AEAT portal:
Family circumstances in personal income tax
Since January 1, 2010, the Madrid taxpayers with three or more children or descendants have been able to apply a minimum per descendant top 10 percent established in state regulations.
In addition, from January 1, 2015, its amount is increased in all amounts as a minimum for descendants and the maximum possible increase is maintained in the case of third or subsequent descendants.
Thus, for the third descendant, an amount of $4.400 (compared to the 4.000 euros contemplated in state regulations), which rises to $4.950 in the case of the fourth and successive descendants (compared to 4.500 state euros).
Finally, in line with the deflation of the rate, the minimums for personal and family circumstances are also updated at 4,1 percent.
The Community of Madrid applies different tax benefits to alleviate the expenses generated by the birth or adoption of children.
So you can deduce 600 euros for each child born or adopted both in the tax period in which the birth or adoption occurs and in each of the two following tax periods.
In the case of multiple births or adoptions, this amount will be increased by 600 euros for each child in the first year in which the deduction is applied.
However, there are some income limits: Thus, you can only apply the deduction if your income does not exceed 30.000 euros in individual taxation or 36.200 euros in joint taxation, nor does the sum of the tax bases of all the members of the family unit of which you are a part exceed 60.000 euros.
To alleviate the expenses generated by international adoptions, families from Madrid can apply a additional deduction of 600 euros.
If you have welcomed a minor into your family environment, you can benefit from this deduction, for the following amounts:
- First minor fostered: 600 euros.
- Second foster child: 750 euros.
- Third minor and successive: 900 euros.
If they live with you over 65 years of age, without close ties of kinship and/or with people with disabilities, without receiving any type of help from the Community of Madrid for it, you can apply from 2018 a deduction of 1.500 euros per year.
The Madrid family that has two or more descendants and income of less than 24.000 euros per year may deduct the 10 percent of the full fee autonomic
If you have children, you can apply a deduction for educational expenses incurred during the second cycle of the Infant Education stage, Compulsory Education and Basic Vocational Training, as well as for language teaching.
You can deduct the expenses corresponding to the compulsory schooling and the acquisition costs of locker room for exclusive school use and expenses for language teaching.
The deduction percentages are:
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5% of clothing costs for school use.
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10% of language teaching expenses.
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15% of compulsory school fees.
The maximum deduction per child is 400 euros per year, which increases to 900 euros per year if school expenses are met.
New to your 2018 statement, This deduction is extended to the expenses borne by children or descendants who take the first cycle of Early Childhood Education (0-3 years) with certain limitations. In this case, the maximum deduction will be $1.000 per year for each child enrolled in this educational stage.
Rent limit:
This deduction can only be applied to those whose tax base, together with that of the rest of the members of their family unit, does not exceed the amount of multiplying 30.000 euros by the number of members of said family unit.
With effect on the 2018 declaration, a new deduction is established for the Hiring one or more people as domestic workers to care for children under 3 years of age.
The deduction is from 20 percent of contributions to Social Security as an employer of one or several persons under the special system of Domestic Employees of the General Social Security Regime, with a lannual deduction limit of 400 euros.
In the case of employers belonging to a large family deduction is from 30 percent with the deduction limit of $500 annually.
Rent limit:
As in the case of educational expenses, this deduction can only be applied to those whose tax base, together with that of the rest of the members of their family unit, does not exceed the amount of multiplying 30.000 euros by the number of members of said family unit.
Wealth Tax
If you live in the Community of Madrid you do not pay Wealth Tax because there is a bonus of 100% of the fee.
Only those who have assets of more than 2.000.000 euros must comply with the formal duty of filing their tax return but without income.
Inheritance and Gift Tax
In the Community of Madrid, both Fathers and sons, As the spouses and common-law partners they only pay the 1% of the quota corresponding to the Tax levied on inheritances and donations.
In addition, from October 28, 2022 the brothers, uncles and nephews of the deceased or donor may apply a bonus of 25% on the amount of the tax.
Previously, inheritances and donations acquired by Brothers were discounted by 15% of the tax quota and in the 10% for uncles and nephews.
Important: in the Community of Madrid unmarried couples registered in public registers of de facto unions that meet the requirements established in Law 11/2001, of December 19, of De facto Unions of the Community of Madrid are assimilated to spouses to these of the Inheritance and Gift Tax.
From January 1, 2023, Fostered and protected minors they are equated with their own descendants for the purposes of applying the regulations approved by the Community of Madrid on Inheritance and Gift Tax.
- In the case of a donation, it is essential to make it in public document (normally before a Notary).
- When it comes to a donation in cash or a deposit in a current or savings account, at sight or in term, it is necessary to justify the origin of the funds, stating it in the public document in which the transmission is formalized.
In the Community of Madrid there is a reduction in 100% donation received, with a maximum of 250.000 euros, for donations between relatives belonging to the kinship groups I and II, as well as between second-degree consanguineous collaterals (brothers) when final destination of the donation is:
- La acquisition of habitual residence of the donee.
- La acquisition of shares and social participations in companies or cooperatives.
- The acquisition of goods, services and rights for the development of a sole proprietorship or professional business.
Sales between individuals
From January 1, 2019 a 100 percent bonus in the Tax on Property Transfers for the acquisition of movable property and livestock whose real value is less than 500 euros.
The discount will not be applied in the case of goods made of precious metals or vehicles that must be registered in public registries of those contemplated in the General Vehicle Regulations.
Nor is it applicable to acquisitions made by entrepreneurs to affect their activity.
Regarding housing
In the Community of Madrid there are tax benefits for the habitual residence.
In the Community of Madrid, the tax rate in Oneros Patrimonial Transmissions It is generally the 6 percent, but as of 2019 you can apply one 10% bonus for the acquisition of your habitual residence.
The bonus on the fee will only be applicable when the real value of the property is equal to or less than 250.000 euros (including, where appropriate, the garages and annexes acquired with the home).
Large families:
In the event that you are the owner of a large family the rate will not be 6 percent but the 4 percent. This reduced rate will be incompatible with the 10% bonus.
In case you have to pay Documentary Legal Acts, the owner of a large family will apply As of January 1, 2019, a discount of 95 percent on the general rate of 0,75 percent.
From January 1, 2019 a bonus of 100 percent of the fee for renting homes that are not intended for the exercise of a business or professional activity, as long as the income to be paid for the rental is less than 15.000 euros per year.
The obligation to submit the self-assessment is eliminated when this discount is applied.
However, due to the fact that the State declared housing leases for stable and permanent use exempt from taxation, you should know that their taxation is as follows:
- During the period between December 19, 2018 and January 23, 2019, leases formalized on housing for stable and permanent use are exempt.
- Rentals of homes that are not intended for the exercise of a business or professional activity that occur from January 24, 2019 to March 5, 2019 enjoy a 100% discount when the agreed annual rent is less than €15.000 .
- As of March 6, 2019, housing leases for stable and permanent use referred to in article 2 of Law 29/1994, of November 24, on Urban Leases, are exempt.
It tienes under 35 years you can apply to the Income Tax 30% deduction of the amounts earmarked for rent, up to a maximum of 1.000 euros per year.
Thus, in an average rent of 500 euros you could deduct the amount of two monthly payments.
Since 2018, if you are over 35 years old, but under 40, and have been unemployed and with at least two dependent family members, you can also apply this deduction.
If you want to apply this deduction you have to prove the bail deposit corresponding to the rent in the Social Housing Agency of the Community of Madrid.
You can prove it by means of a copy of the deposit receipt of the bond or be in possession of a copy of the complaint filed with said body for having refused the owner to deliver a copy of the receipt.
However, there are some income limits.
Thus, you can only apply the deduction if your income does not exceed 25.620 euros in individual taxation or 36.200 euros in joint taxation.
Nor can the sum of the tax bases of all the members of the family unit of which you are a part exceed 60.000 euros.
In order for you to apply the deduction, the annual rental expense must exceed 20 percent of your tax base.