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You are a tenant and do not know how to declare the income on the IRS? Are you a landlord and have questions about how to fill in the declaration? See what you have to do to comply with this tax obligation.
Expenses with rented properties must be declared by the tenants, who can thus benefit from the respective deduction. Landlords are also required to declare rents to the IRS, but in the income category.
However, to comply with this obligation to declare income, it is necessary to respect two conditions.
The first is that the contract is registered on the Finance Portal. The second condition is that it has been done under the Urban Arrendamento Regime or the New Urban Arrendamento Regime.
When declaring income expenses with the IRS you can deduct 15% of the amount you spent, up to a limit of 502 euros. Although, in cases where the income is lower (up to 7,116 euros), the deduction can reach 800 euros.
Thus, if you are a tenant, by including this expense in your return you will increase the deduction and reduce the amount of tax to be paid.
What needs to be done?
If the lease agreement complies with the aforementioned requirements, the amount of rent you paid must appear, as of March 15, in the collection deductions on your page on the Finance Portal.
The amounts were previously communicated by the landlord to the Tax Authority (AT). So you should confirm at that time that everything is right. If not, the deadline to claim is until the end of March.
Then, before filling out the IRS declaration, add up the amount of all the rents you paid. Don’t forget to subtract any support for paying rent.
Where to report income to the IRS?
To declare these income expenses with the IRS you must go to the Annex H of the Model 3 declaration and look for box 6C. If you chose a pre-filled statement, the amount must already be included in the document.
If you detect any errors, you must correct them. Just click on “Add row”. Then, fill in the requested data.
- Expense code: choice 654 – Charges with rents for a building intended for permanent housing borne by the lessee;
- Holder: enter your NIF;
- Amount: In this field enter the value of the rents.
Still in Annex H, see now the frame 7. In this space you must identify the property, using information that is in the lease agreement.
To do so, choose “Add Line” and fill in the following fields:
- Nature of Charge: code 05 – Charges with rents for buildings intended for permanent housing;
- Parish: indicate the parish code of the property;
- Type: choose between rustic, urban or omitted;
- Article: property number;
- Fraction: fraction of the property;
- Holder: your NIF;
- Tenant NIF: you must not fill in this field;
- Lender/lessor NIF: Landlord’s VAT number.
And the landlords?
In the case of landlords, values with rents are included in the field of income. Landlords have two options for reporting rents to the IRS:
- Income is considered as property income (Category F) and, therefore, must complete the annex F;
- If they have open activity as sole proprietorship and issue invoices-receipts, they can declare the income as business and professional income (Category B) and, therefore, must fill in the annex B.
Declaring income to the IRS as property income
As mentioned, when choosing to declare IRS income as property income, you must complete Annex F.
Income subject to tax is obtained by subtracting, from the rent received, the expenses incurred with the property, such as:
- IMI value;
- Condo fees;
- Compulsory fire insurance;
- Conservation and maintenance works supported and paid for in the 24 months prior to the start of the lease. The property cannot have been used for any purpose other than renting and enhancement works are not included;
- Energetic certificate.
How are rents taxed?
Income obtained from the leasing of real estate is subject to autonomous taxation at the rate of 28%.
However, it is possible to reduce this rate if the contract has a duration of two years or more. The amount of the reduction depends on the duration and your renewals, as you can see in the table below:
|Lease duration||IRS rate||IRS rate for equal renewal|
|Less than two years||28%||–|
|From two to five years||26%||Minus two percentage points up to 14%|
|Five to ten years||23%||Minus five percentage points up to 14%|
|From ten to 20 years||14%||No additional reductions per renewal|
|Over 20 years||10%||No additional reductions per renewal|
These fees only apply to lease agreements entered into from January 1, 2019 and respective renewals and to contract renewals prior to 2019 verified from January 1.
Note, however, that the Mais Habitação Program, approved in 2023, changed the tax regime for contract renewals. These changes may have an impact on the 2023 IRS, due in 2024. Learn more in the following article:
Autonomous taxation is the option defined by AT to declare this type of income. However, when declaring rents at the IRS, you have the option of opting for aggregation.
That is, you can add these values to the other income you obtained during the year. The IRS rate is then applied to this sum, according to the scales in force.
The option for aggregation is favorable if the total amount of income is less than 10,736 euros, therefore paying a rate of 23%.
If you intend to opt for the aggregation, you must complete Table 6F in Annex F.
Declare income with the IRS in Category B
Income with the IRS can also be declared as business income if the landlord has an open activity as a sole proprietorship and issues invoices.
If you choose this option, the way in which the taxable income is calculated depends on whether the landlord is in the simplified regime or if he has organized accounting.
In the first option, a coefficient of 0.95% is applied on the value of rents, after deducting expenses. However, it cannot include expenses such as loans, depreciation, furniture, appliances and decoration items or IMI. If you have organized accounting, you can already deduct these expenses. In this case, taxable income is understood, in tax terms, as taxable income.
When declaring income with the IRS as category B income, you must opt for aggregation. You must complete Annex B, identifying the property and indicating income and expenses.
What if the tenant doesn’t pay? Do I have to declare income to the IRS?
The declaration to be submitted in 2023 concerns the income you earned in 2022, that is, the amounts you actually received. Thus, if the tenants have failed to pay their rent for a month, the landlord should not declare these rents to the IRS.
Article originally published in July 2019. Last updated in April 2023.