US-Spain Tax Treaty: Property Owner's Guide 2026

American investment in Spanish real estate has surged by 255% since 2020, making US citizens one of the fastest-growing buyer groups on the Mediterranean coast. Yet most Americans purchasing a seaside villa in Calpe, a hillside retreat in Altea, or a modern apartment in Javea share the same concern: will I be taxed twice on the same income? The answer lies in the US-Spain tax treaty property provisions - a bilateral agreement that, when properly applied, ensures you are never forced to pay full taxes to both governments on the same earnings. This guide breaks down every article, form, and filing deadline that matters to Americans who own or plan to own property on Costa Blanca, Spain, in 2026.

What Is the US-Spain Tax Treaty?

The formal name is the Convention between the United States of America and the Kingdom of Spain for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income. It was signed on February 22, 1990. A Protocol amending several key provisions was signed on January 14, 2013, and after years of ratification delays, the updated Protocol finally entered into force on November 27, 2019.

For property owners, three articles matter most:

Understanding these provisions is essential before you sign a purchase contract. For a broader overview of the buying process, see our complete guide to buying property in Spain as an American.

Spanish Taxes Every US Property Owner Must Know

Spain imposes several distinct taxes on non-resident property owners. Each one has its own rate, filing form, and deadline. Here is what you will encounter as an American owning property in Moraira, Calpe, Javea, or anywhere else on Costa Blanca.

IRNR - Non-Resident Income Tax (Impuesto sobre la Renta de No Residentes)

The IRNR is Spain's primary tax on non-resident income. It applies in two different scenarios:

If you rent your property: Rental income is taxed at a flat 24% for non-EU/EEA residents (which includes Americans). Historically, non-EU owners could not deduct any expenses from this gross income, putting them at a severe disadvantage compared to EU nationals who pay only 19% on net income. However, a landmark ruling by the Audiencia Nacional in July 2025 changed the landscape: non-EU property owners can now deduct allowable rental expenses, bringing the effective tax rate substantially lower. This is one of the most significant Spanish property tax Americans updates in recent years.

Allowable deductions include mortgage interest, property management fees, insurance, maintenance costs, community fees, depreciation (3% of construction value), and local taxes such as IBI. A well-maintained rental villa in Altea generating EUR 30,000 in gross annual income might see its taxable base drop to EUR 18,000-22,000 after deductions.

If you do not rent your property: Spain taxes "imputed income" on properties that sit empty or are used for personal enjoyment. The imputed income is calculated as 1.1% of the cadastral value (if the value was revised in the last 10 years) or 2% of the cadastral value (if it has not been revised). That imputed figure is then taxed at the 24% non-resident rate. For a property with a cadastral value of EUR 200,000 (revised), the annual imputed income tax would be roughly EUR 528 (200,000 x 1.1% x 24%).

Filing: Since 2025, IRNR for non-residents is filed annually via Modelo 210, during the period of January 1 to January 20 for the prior tax year. This replaced the previous quarterly filing requirement. For a detailed breakdown of all Spanish property taxes, visit our Spain property tax guide.

IBI - Local Property Tax (Impuesto sobre Bienes Inmuebles)

IBI is Spain's equivalent of council tax or municipal property tax. It is an annual local tax set by each town hall, ranging from roughly 0.4% to 1.1% of the cadastral value. In popular Costa Blanca municipalities such as Calpe, Javea, and Moraira, the effective IBI rate typically falls between 0.5% and 0.8%. For a property with a cadastral value of EUR 200,000, expect an annual IBI bill of EUR 1,000-1,600.

IBI is a local tax, not an income tax. This distinction is critical for US taxpayers, because the Foreign Tax Credit can only offset foreign income taxes against US tax, not property or wealth taxes.

Capital Gains Tax on Sale (Ganancias Patrimoniales)

When a non-resident sells Spanish property, the capital gain is taxed at a flat 19%. The gain is calculated as the difference between the acquisition value (purchase price plus allowable costs such as notary fees, transfer tax, and legal fees) and the sale price (minus selling expenses).

Importantly, the buyer is legally required to withhold 3% of the total sale price and remit it directly to the Spanish Tax Agency (Agencia Tributaria) via Modelo 211. This acts as a prepayment on your capital gains liability. If the 3% withholding exceeds your actual CGT obligation, you can file Modelo 210 to claim a refund of the overpayment. If the withholding falls short, you must pay the difference.

Plusvalia Municipal (Impuesto sobre el Incremento de Valor de los Terrenos)

Often called "plusvalia," this municipal tax is levied on the theoretical increase in land value between acquisition and sale. It is calculated by the local town hall based on the cadastral land value and the number of years you owned the property. Following the 2021 Constitutional Court ruling that reformed its calculation methodology, municipalities now use the higher of two methods: the "real" method (based on actual gain) or the "objective" method (based on cadastral coefficients). The amount is generally modest - typically EUR 1,000 to EUR 5,000 for a standard Costa Blanca property held for five to ten years.

Wealth Tax (Impuesto sobre el Patrimonio)

Spain levies an annual wealth tax on worldwide net assets, but for non-residents it applies only to Spanish-located assets. Non-residents receive a EUR 700,000 personal exemption on Spanish assets. If your Spanish property is valued at or below this threshold, you owe nothing.

Above EUR 700,000, progressive rates apply from 0.2% to 3.5%. The Valencia region (which encompasses Costa Blanca) raised the wealth tax exemption to EUR 1,000,000 for residents in 2025, although this higher exemption applies only to fiscal residents of the Valencian Community, not to non-residents. As a US non-resident owner, the EUR 700,000 national exemption remains your baseline.

Additionally, Spain's Solidarity Tax on Large Fortunes (Impuesto Temporal de Solidaridad de las Grandes Fortunas) affects non-residents with Spanish assets exceeding EUR 3,000,000. Originally introduced as a temporary measure, it was made permanent in 2025. Rates range from 1.7% to 3.5% on assets above the EUR 3M threshold.

US Tax Reporting Requirements for Spanish Property

Owning property in Spain creates multiple reporting obligations with the IRS and FinCEN, regardless of whether you owe additional US tax. Missing a deadline or failing to file can trigger penalties far exceeding any tax owed. For an in-depth look at US reporting requirements, see our dedicated US tax and FATCA guide for Spain property owners.

FBAR - Foreign Bank Account Report (FinCEN Form 114)

If you maintain a Spanish bank account to receive rental income, pay utilities, or manage your property, you likely need to file an FBAR. The filing threshold is straightforward: if the aggregate balance of all your foreign financial accounts exceeds $10,000 at any point during the calendar year, you must report every foreign account - not just the one that crossed the threshold.

The FBAR is filed electronically with FinCEN (not the IRS). The deadline is April 15, with an automatic extension to October 15. No separate extension request is needed. However, the penalties for non-compliance are severe: up to $16,117 per violation for non-willful failures (adjusted for inflation in 2026), and up to $100,000 or 50% of the account balance for willful violations. Criminal penalties can also apply. This is not a form to forget.

FATCA - Foreign Account Tax Compliance Act (Form 8938)

FATCA Spain property reporting is frequently misunderstood. Form 8938, filed with your tax return, requires disclosure of "specified foreign financial assets" above certain thresholds:

Here is the critical nuance: real property directly held is NOT a specified foreign financial asset under FATCA. Your villa in Calpe itself does not need to be reported on Form 8938. However, the Spanish bank account you use to receive rental deposits, pay your community fees, or hold proceeds from a sale is a reportable financial asset. Similarly, if you hold your property through a foreign entity or trust, the interest in that entity may be reportable.

Foreign Tax Credit - Form 1116

The Foreign Tax Credit Spain mechanism is the primary tool that prevents double taxation. When you pay Spanish income taxes (IRNR on rental income, capital gains tax on a sale), you claim a dollar-for-dollar credit on IRS Form 1116 against your US tax liability on the same income.

Key rules:

Schedule E - Reporting Rental Income

All rental income from Spanish property must be reported on Schedule E of your US Form 1040, even if you already paid IRNR in Spain. You report gross rental income, then claim US-allowable deductions including:

After calculating your net US rental income, you apply the Foreign Tax Credit from Form 1116 to offset the US tax. In many cases, the Spanish IRNR at 24% exceeds the marginal US rate on the same income, meaning you owe $0 additional US tax and carry forward excess credits.

How Double Taxation Relief Works - A Practical Example

Let us walk through a realistic scenario for a US citizen who owns a rental property on Costa Blanca.

The situation: You purchased a villa in Calpe for EUR 500,000. You rent it to holidaymakers for EUR 30,000 per year in gross rental income. Your allowable Spanish deductions (mortgage interest, maintenance, insurance, community fees, depreciation) total EUR 10,000.

Step 1 - Spanish taxes:

Step 2 - US tax return:

The bottom line: You pay only your Spanish tax obligations. The treaty's double taxation relief mechanism, implemented through the Foreign Tax Credit, ensures that you are not taxed twice on the same rental income. This is exactly how the US-Spain tax treaty property provisions are designed to work.

Important: IBI is not creditable as a Foreign Tax Credit because it is a property tax, not an income tax. However, it may be deductible as an expense on your Schedule E, reducing your US taxable rental income.

Selling Your Spanish Property - Tax Implications for Americans

Capital gains on the sale of Spanish property by a non-resident are taxed at a flat 19% in Spain. Here is how a typical sale might unfold for a US owner.

The scenario: You bought a villa in Moraira for EUR 500,000 five years ago and sell it for EUR 600,000.

Spanish capital gains tax:

The 3% withholding:

Plusvalia Municipal: Estimated at approximately EUR 2,000 for five years of ownership, depending on the municipality and cadastral land value.

US treatment:

For those considering purchasing investment property, explore the current listings on Costa Blanca to see what is available.

2025-2026 Changes That Affect US Property Owners

Tax law never stands still. Here are the most significant recent developments affecting Americans with Spanish property:

July 2025 - Audiencia Nacional ruling on non-EU rental deductions: This is arguably the single biggest win for US property owners in Spain in the last decade. The Spanish National High Court ruled that denying expense deductions to non-EU rental property owners while allowing them for EU owners violates principles of free movement of capital. Non-EU non-residents, including Americans, may now deduct allowable rental expenses when calculating their IRNR tax base. This can reduce the effective tax rate from 24% of gross income to as low as 10-14% of gross income for well-managed properties.

Modelo 210 filing change: Non-resident income tax for rental and imputed income is now filed annually (January 1-20 for the prior year) rather than quarterly. This simplifies compliance substantially but means you must be disciplined about record-keeping throughout the year.

Valencia Wealth Tax exemption raised: The Valencian Community (which includes all Costa Blanca towns: Altea, Calpe, Javea, Moraira, Denia, and Benidorm) raised its wealth tax exemption to EUR 1,000,000 for fiscal residents. Non-residents still use the national EUR 700,000 threshold, but those who establish fiscal residency in Spain may benefit from the higher regional exemption.

Solidarity Tax on Large Fortunes made permanent: Initially introduced as a "temporary" two-year measure, this additional tax on net wealth above EUR 3,000,000 was made permanent in 2025. Rates are 1.7% on EUR 3M-5M, 2.1% on EUR 5M-10M, and 3.5% above EUR 10M. For ultra-high-net-worth Americans with substantial Spanish real estate portfolios, this adds a meaningful layer of taxation.

FBAR penalties adjusted for inflation (2026): The non-willful FBAR penalty has been adjusted upward from $15,611 to approximately $16,117 per account per year, continuing the annual inflation adjustment that began in 2016. Willful penalties also increased proportionally.

10 Common Tax Mistakes US Property Owners Make in Spain

Frequently Asked Questions

Do I need to pay taxes in both the US and Spain on rental income from my Spanish property?

You will file tax returns in both countries, but you should not pay full tax to both. Spain taxes your rental income via IRNR at 24% (with deductions now available following the July 2025 ruling). The US requires you to report the same income on Schedule E. However, you claim a Foreign Tax Credit on Form 1116 for the Spanish IRNR paid, which offsets your US tax liability. In practice, most Americans pay only Spanish taxes on rental income, with $0 additional US tax owed. This is the core benefit of the double taxation Spain USA treaty provisions.

What is the 3% withholding when selling property in Spain?

When a non-resident sells Spanish property, the buyer is legally required to withhold 3% of the total sale price and remit it to the Spanish Tax Agency (Hacienda) within 30 days via Modelo 211. This serves as a prepayment against your capital gains tax liability. If your actual CGT (19% of the gain) is less than the 3% withholding, you file Modelo 210 to claim a refund. If the 3% does not cover your full CGT, you pay the difference.

How do I file Spanish taxes as a US non-resident property owner?

You file using Modelo 210, which is now submitted annually between January 1 and January 20 for the prior tax year. Most Americans appoint a Spanish tax advisor (asesor fiscal) or fiscal representative to handle this filing. You will need your NIE (foreigner identification number), property details, and income documentation. For guidance on obtaining your NIE, see our Americans buying guide.

Can I deduct mortgage interest on Spanish property from my US taxes?

If the property is a rental, yes - mortgage interest is deductible as a rental expense on Schedule E, which reduces your US taxable rental income. If the property is a personal vacation home (not rented), mortgage interest deductibility on US returns depends on whether it qualifies as a "qualified residence" under IRC Section 163(h). Generally, you can designate one foreign home as a qualified second residence, making mortgage interest deductible on Schedule A (if you itemize). However, the Tax Cuts and Jobs Act limits the total mortgage interest deduction to interest on $750,000 of combined acquisition debt.

What happens if I do not file FBAR for my Spanish bank account?

Penalties for non-filing are among the harshest in the US tax code. Non-willful violations carry penalties of up to $16,117 per account per year (2026 figure, adjusted for inflation). Willful violations can trigger penalties of up to $100,000 or 50% of the account balance, whichever is greater, plus potential criminal prosecution. The IRS has access to Spanish bank account information through both FATCA and the Common Reporting Standard (CRS). Voluntary disclosure programs exist for those who have missed past filings and want to come into compliance.

Is there a wealth tax exemption for US property owners in Spain?

Yes. Non-resident property owners receive a EUR 700,000 exemption on Spanish-located assets for Wealth Tax purposes. If your Spanish property (at its assessed value, not necessarily market value) and other Spanish assets fall below EUR 700,000, you owe no Wealth Tax. Above that threshold, progressive rates from 0.2% to 3.5% apply. Note that the higher EUR 1,000,000 exemption in Valencia applies only to fiscal residents of the Valencian Community, not to non-residents.

How does the Foreign Tax Credit prevent double taxation?

The Foreign Tax Credit Spain mechanism works by allowing you to apply Spanish income taxes paid as a dollar-for-dollar credit against your US tax liability on the same income. For example, if you pay EUR 5,000 in Spanish IRNR on rental income and your US tax on that same income would be $4,500, the FTC eliminates your US tax entirely. You may even carry forward the excess credit for up to ten years. The credit is claimed on IRS Form 1116, and it applies only to income taxes - not to property taxes (IBI), wealth taxes, or plusvalia. For most Americans with property on Costa Blanca, the FTC ensures they pay tax only once.

Protect Your Investment with the Right Guidance

The US-Spain tax treaty is powerful, but only if you use it correctly. Every year, Americans on Costa Blanca leave thousands of euros on the table by missing deductions, failing to file required forms, or not claiming credits they are entitled to. The stakes are high - not only in taxes owed but in penalties for non-compliance that can reach six figures.

At Casa Rica Estate, we help American buyers navigate the full journey of purchasing property on Costa Blanca - from identifying the right villa in the best town for your lifestyle to connecting you with qualified cross-border tax advisors, bilingual lawyers, and fiscal representatives who specialize in US-Spain compliance. Whether you are retiring from the USA to Spain or investing in a holiday rental in Calpe or Javea, we ensure every step is handled with precision.

Contact Casa Rica Estate to discuss your property search and get connected with our trusted network of tax and legal professionals.