Spain vs. USA: How Real Estate Income Is Taxed — What Global Investors Must Know

Thinking about investing in property overseas?
Before you sign a deal, there’s one thing more important than location, rental yield, or appreciation potential:

How each country taxes your real estate income.

Many investors assume that the rules that work in the U.S. will naturally apply abroad. But when you start investing internationally, you quickly realize that every tax system has its own logic — and they rarely match.

One of my American expat clients learned this firsthand while managing homes in both New York and Madrid. The differences between the IRS and Spain’s Hacienda were surprising — and costly.

If you’re an expat, global investor, or planning to buy real estate in Spain or the USA, this guide will help you understand the tax rules that can directly impact your returns.

Why U.S. vs. Spain Real Estate Taxes Matter

Cross-border real estate investing can be profitable, but only when you understand how your rental income, deductions, depreciation, and capital gains are taxed.
A tax strategy that works beautifully in the U.S. can fall apart in Europe — and vice versa.

Let’s break down the biggest differences.

1. Depreciation: Generous in the U.S., Limited in Spain

United States

The U.S. tax system gives real estate investors a massive advantage through depreciation:

• 27.5-year depreciation for residential real estate
• Large annual write-offs that reduce taxable rental income
• Flexibility in land vs building allocation

For many U.S. investors, depreciation is the cornerstone of tax planning.

Spain

Spain offers far less:

• Typically 3% per year depreciation
• Only on the building, not the land
• Smaller deductions → higher taxable rental income

If you rely on depreciation to reduce taxes, Spain’s rules may significantly shrink your tax savings.

2. Deductions: Broad Tax Breaks in the U.S., Tight Restrictions in Spain

United States

U.S. landlords benefit from one of the most deduction-friendly systems in the world. You can deduct:

• Mortgage interest
• Property taxes
• Repairs & maintenance
• Insurance
• Professional fees
• HOA dues
• Depreciation

Almost every expense tied to maintaining or operating the property can reduce your taxable income.

Spain

Spain is stricter — especially for non-residents:

• Only specific, clearly linked expenses are allowed
• Many U.S. deduction categories do not exist
• Non-residents have even fewer deductible options

This can lead to much higher net taxable rental income than U.S. investors expect.

3. Capital Gains Tax: Preferential Rates in the U.S., Higher Rates in Spain

United States

If you hold a property for more than one year:

• You benefit from long-term capital gains rates (15–20%)
• Potential for 1031 exchanges to defer tax
• Additional exclusions for primary residences

This is one reason long-term U.S. real estate investing is so tax-efficient.

Spain

In Spain:

• Capital gains are taxed between 19–28%
• No “long-term” preferential rates
• No tax-free rollover options similar to 1031

A gain is a gain — and it is fully taxable.

4. The Complications: Credits, Treaties & Currency

Beyond individual country rules, cross-border real estate investors must consider:

• Foreign Tax Credits (FTC)
• The U.S.–Spain Double Taxation Treaty
• Currency conversion on rental income and sales
• Reporting foreign assets to the IRS
• State-level U.S. tax treatment (if applicable)

This is where many investors unknowingly double-pay tax or misreport income.

Key Takeaways for U.S. Expats & International Investors

• Don’t assume U.S. tax benefits apply abroad — they usually don’t.
• Understand both tax systems before buying, renting, or selling foreign real estate.
• Plan ahead to avoid double taxation and lost deductions.
• Work with a cross-border tax specialist who understands U.S. and Spanish rules.

Your biggest real estate mistakes won’t come from buying the wrong property — they’ll come from misunderstanding how the property is taxed.

Need Help Structuring Your International Real Estate Taxes?

If you’re an American investing in Spain — or a Spanish resident investing in the U.S. — proper tax planning can save you thousands in unnecessary taxes.

I help:

• U.S. expats
• Investors owning property in multiple countries
• High-net-worth families with cross-border real estate portfolios

Get clarity, avoid double taxation, and optimize your global returns.

Book a strategy call today
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