19 Jan Rental Income Taxation 2026: New Intermediate Rate & Incentives for Vacant Properties
Rental Income Taxation 2026: New Intermediate Rate & Incentives for Vacant Properties
The year 2026 introduces a major reform in the rental income tax scale, with the establishment of a new intermediate rate of 25% for income ranging from €12,001 to €24,000. By eliminating the steep jump from 15% to 35%, the new structure is more proportional and equitable.
This change, combined with new incentives for making vacant homes available for long-term rent, is expected to reshape the real estate market by encouraging increased property supply.
New Tax Scale for Rental Income (Tax Year 2025)
Rental income from real estate is taxed separately, based on the following brackets:
| Rental Income Tax Rates for Individuals | |||
| Income Bracket (EUR) | Tax Rate % | Total | |
| Income (ευρώ) | Total Tax (ευρώ) | ||
| 12000,00 | 15% | 12.000,00 | 1.800,00 |
| Next 12000 | 25% | 24.000,00 | 4.800,00 |
| Next 12000 | 35% | 36.000,00 | 9.000,00 |
| Over (>36000,00) | 45% | ||
Note: The tax is calculated on the net rental income, which is determined after the automatic 5% deduction for repair and maintenance expenses.
Practical Example:
Below is a practical calculation example illustrating the difference for a property owner with rental income, comparing the old system with the new 2026 regime:
Let’s consider a landlord earning €26,000 per year from rental income:
Under the Old System (Until 2025):
- First €12,000 × 15% = €1,800
- Remaining €14,000 × 35% = €4,900
- Total Tax: €6,700
Under the New System (From 2026):
- First €12,000 × 15% = €1,800
- Next €12,000 × 25% = €3,000
- Remaining €2,000 × 35% = €700
- Total Tax: €5,500
A tax saving of €1,200 per year for landlords with income over €24,000.
Additional Key Provisions for Long-Term Rentals & Tax Exemptions
- Long-Term Lease Incentives for Vacant Properties
Starting in the previous tax year, the “Vacant Property Incentive” was introduced, offering full income tax exemption for 3 years for owners who either rent out vacant homes, or convert their properties from short-term rentals (e.g., Airbnb) to long-term leases.
Conditions:
The exemption applies for the first 36 months following the month the lease agreement is signed, for income derived from properties up to 120 m², plus an additional 20 m² per dependent child, provided that the following criteria are met:
- The lease has a minimum duration of 3 years and is signed between September 8, 2024, and December 31, 2026.
- The property has been either declared as vacant in the E2 form for the three previous tax years, or not declared as rented, primary or secondary residence, self-used, or provided free of charge in forms E1 and E2.
- The property has been exclusively used for short-term rental in the previous year, with the corresponding declarations submitted to the tax authority.
Important Notes:
- If the property becomes vacant during the 3-year exemption, the benefit is revoked from that tax year onward.
However, the exemption may continue if the property is re-leased before 31/12/2026, or if it is rented for at least 6 consecutive months to:
-Public sector healthcare personnel
-Public school educators
-Military and uniformed personnel
- If the property is used for short-term rental, the exemption is retroactively revoked from the first year.
- To qualify, the landlord must have timely filed rental declarations (E2) and annual tax returns. For tax years 2022 and 2023, proof that the property was vacant must come from filings submitted no later than December 5, 2024.
- The size increase per child is based on the number of dependent children declared at the time of lease contract signing.
- Electronic Rent Payments
As of January 1, 2026, electronic payment of rent becomes mandatory.
If rent is not paid via the banking system (e.g., bank transfer, e-banking), the landlord loses the automatic 5% expense deduction on their rental income. Until now, the 5% deduction was granted across the board to all taxpayers without requiring any supporting documents.
The start date for this rule has been postponed to April 1, 2026, to allow both landlords and tenants time to adapt.
How to Avoid Taxation on Uncollected Rental Income
The taxation of uncollected rental income constitutes a significant challenge for property owners, as the tax rate may reach up to 45%. To avoid taxation on uncollected rents, property owners must follow the three (3) key steps below:
- Issuance of a Court Decision or Legal Action:
Property owners must obtain one (1) of the following:
- Payment order or order for restitution of use of the leased property.
- Court decision ordering eviction or awarding unpaid rent.
- Lawsuit for eviction or for the award of unpaid rent.
If the tenant has declared bankruptcy, submission of the creditors’ claims register is sufficient.
- Submission of Supporting Documents to the Tax Authority:
- Photocopies of the above-mentioned orders, court decisions, or lawsuits must be submitted to the competent tax authority.
- The supporting documents must clearly indicate the period to which the unpaid rental amounts relate.
- In case the required documentation is not submitted, the uncollected rents will be deemed as collected and will be subject to taxation.
- Declaration of Uncollected Rental Income:
- Uncollected rental income must be declared in Form E2. The amounts are then automatically transferred to Form E1.
- If uncollected rents are declared in Form E2 without the required supporting documents, the tax authority will issue a new tax assessment and impose the corresponding tax.
