Madrid is one of the communities with the friendliest taxation, mainly through taxes such as Inheritance and Donations or Patrimony. Madrid residents also enjoy a de facto personal income tax rate with lower brackets than the national scale in 2023 and 2024, which are added to the income deductions that apply in the region.
In total, Madrid applies up to 18 different personal income tax deductions, although many can be grouped by type. These are the income reductions for Madrid residents.
Deduction for birth or adoption
Madrid residents can apply a reduction of 721.7 euros for each child adopted or born, which increases by that same amount in the case of multiple births.
In order to apply the deduction, the sum of the general and savings tax bases may not exceed 30,930 euros in individual taxation or 67,322.2 euros jointly. Added to this is a general limit of 61,860 euros for the income of the entire family unit.
Deduction for international adoption
The deduction of 721.7 euros also applies to international births. If the adopted child lives with both parents, the degradation increases by 50% and will be divided equally between each of them.
Deduction for foster care of minors
Taking in minor family members allows you to apply a deduction that ranges from 618.6 euros for the first minor to 927.9 euros for the third child. These amounts refer to each minor.
To enjoy it, the tax base must be 26,424.22 euros in individual taxation and 37,322.2 euros in joint taxation.
Deduction for hosting people over 65 years of age or people with disabilities
The deduction for hosting people over 65 years of age or people with disabilities amounts to 1,546 euros for each person over 65 years of age or person with a degree of disability equal to or greater than 33%.
To enjoy it, it is necessary that the person has lived more than 183 days a year with the taxpayer under a foster care regime without compensation.
The limits to access it are the same as in the previous deduction.
Deduction for care of ancestors
The Community of Madrid pays via personal income tax up to 515.5 euros for each ascendant over 65 years of age or with a degree of disability equal to or greater than 33%.
Deduction for renting the habitual residence
Living on rent has a tax premium in Madrid, although only for those under 35 and people up to 40 who have been unemployed and have family responsibilities.
These taxpayers will be able to deduct 30% of the money allocated to renting up to a maximum of 1,237.5 euros.
Deduction for expenses derived from renting homes
Landlords will be able to deduct from the rent 10% of the costs of repair and conservation, formalization of the contract, insurance premiums and the energy efficiency certificate of the house they rent, up to a maximum of 154.65 euros.
These expenses can be added to the rest of the deductible rental expenses.
Deduction for donations to foundations and sports clubs
Donations to foundations and sports clubs give rise to a deduction of 15% of the amounts donated.
In any case, the base of the deduction may not exceed 10% of the taxpayer’s taxable base.
Deduction for educational expenses
Madrid is one of the communities that allows educational expenses to be deducted. Specifically, parents will be able to deduct:
15% of school expenses. 15% of language teaching expenses as an extracurricular activity. 5% of the costs of purchasing clothing for exclusive school use.
These schooling expenses range from early childhood education to compulsory basic education or vocational training. Meanwhile, clothing costs only apply to clothing required by the center.
Deduction for caring for children under 3 years of age, dependent elderly people and people with disabilities.
Madrid taxpayers can apply a deduction for the care of children under 3 years of age.
Specifically, they will be able to deduct up to 25% of the contributions to the Special System for Domestic Employees of the person who has employees to care for children under 3 years of age, dependent elderly people and people with disabilities. The deduction limit is 463.95 euros per year.
Large families can extend the deduction up to 40% and a maximum of 618.6 euros per year.
To be able to access it, the general tax base of savings may not exceed the amount corresponding to multiplying the number of members of the family unit by 30,930.
Deduction for the payment of mortgage interest for young people under 30 years of age
Another deduction for young people in Madrid that allows 25% of the interest allocated to the purchase of a primary home by those under 30 years of age to be deducted.
The maximum limit of the deduction is 1,031 euros.
Deduction for payment of interest on loans for graduate studies
Students can deduct the import interest on benefits for pursuing university studies for a Bachelor’s, Master’s or Doctorate.
Deduction for acquisition of habitual residence due to birth or adoption of children
Parents can deduct 10% of the price of the home up to a limit of 1,546.5 euros.
In order to apply the deduction, the purchase that has been purchased or is under construction and that will be the family’s habitual residence. The deduction applies to purchases made within a period of up to 3 years from birth or adoption.
In any case, the general tax base of savings may not exceed the amount corresponding to multiplying the number of members of the family unit by 30,930.
Deduction for obtaining the status of large family of general or special category
Families that have obtained general category large status in 2023 will be able to apply a deduction of 50% of the full regional quota up to a maximum of 6,186 euros in individual taxation and double that (12,372 euros) in joint taxation.
Large families in a special category may apply a 100% deduction in the regional tax up to 12,372 euros in individual taxation and 24,744 euros jointly.
Deduction for families with two or more descendants and low income
A Madrid deduction focused on more vulnerable groups that will be able to deduct 10% of the import resulting from lowering the full autonomous quota in the rest of the deductions of the Community of Madrid.
Reduced income is understood to mean that the general and savings tax bases do not exceed 24,744 euros.
Deduction for investment in the acquisition of shares in newly created companies
Entrepreneurship and investment in newly created companies allows a deduction of 40% up to 9,279 euros when they are a public limited company or a limited liability company.
The degradation increases up to 50% and a maximum of 12,372 euros for labor limited liability companies, labor limited liability companies and cooperative societies.
As with the deduction for investment in start-ups, this investment must meet a series of requirements. The most important thing is that the investment must be maintained for a minimum of 3 years and that the company is based in Madrid.
Deduction for promoting self-employment of young people under 35 years of age
Those under 35 years of age who have become self-employed can enjoy a deduction of 1,031 euros, provided that it is the first time they worked on their own, that their activity was carried out in Madrid and that they will maintain it for one year.
Deduction for investments made in entities listed on the alternative stock market
Investments in the BME Groth market, the former MAB, allow you to deduct up to 20% of the amounts invested with a maximum limit of 10,310 euros.
Additionally, it is necessary to hold the shares for at least two years.
These are all the deductions that Madrid residents can make on their income.
