How is rental income taxed in 2026?

Category F or Category B: how the landlord is taxed

Rent received by an owner is, as a rule, Category F income (property income). For this, the contract must be reported to the Tax Authority and rent receipts must be electronic, both through the Portal das Finanças.

It is only possible to opt for Category B (business income) if the landlord is registered as self-employed, with activity code CAE 68200, and issues "recibos verdes" - which also means Social Security contributions, unless exempt. This option requires automatic aggregation, with standard IRS rates between 14.5% and 48%, although with a reduced coefficient: only 35% of the rent is treated as taxable income (50% in containment areas).

The old contract-length regime is still in force

Alongside the 10% rate for moderate rents, the reduction based on contract length, in force since 2024 (Law no. 56/2023), remains in place and can be even more favourable for long contracts:

• 15% - contract lasting between 5 and 10 years, with a further reduction of 2 percentage points for each renewal of equal length, down to a minimum of 5%;
• 10% - contract lasting between 10 and 20 years;
• 5% - contract lasting 20 years or more.

This regime has its own condition, separate from the €2,300 limit: the monthly rent cannot exceed by more than 50% the reference values by municipality and typology set in Ordinance no. 176/2019 - that is, it must stay at or below 150% of that reference value. A contract of exactly 10 years, for example, already secures the 10% rate, provided the rent respects that cap. The two regimes coexist: whichever is more advantageous for the landlord always applies.

Example: the 150% limit in Lisbon, Cascais and Oeiras

Ordinance 176/2019 divides the country's municipalities into six reference bands. Lisbon stands alone in the highest band; Cascais and Oeiras share the next band, along with Porto. Based on the ordinance's original reference values, the 150% cap (the limit for accessing the reduced rates by contract length) looks like this for the most common typologies:

In practice: a T2 in Cascais with rent up to €1,500/month and a 10-year contract gets the 10% rate under the contract-length regime - whether the rent were above the €2,300 limit would be irrelevant here, since €1,500 is well below that cap anyway. It is in larger typologies (T4, T5) in Lisbon that the two limits may diverge and it is worth calculating both regimes side by side.

Note: values checked against the official republication of Ordinance no. 176/2019 made by Ordinance no. 53/2024 (Diário da República). Since 2024, the law provides for this table to be updated automatically every year by a residential rent update coefficient, rounded up to the next euro - so the exact values in force in 2026 may be slightly higher than these. Always confirm the current value with IHRU or a certified accountant.

The three rates in 2026 (moderate rent regime)

Worked example

A landlord receives €7,200 in annual rent (€600/month) and incurs €1,000 in deductible expenses. The amount subject to IRS is €6,200. If the contract meets the moderate-rent criteria, they pay €620 in IRS (10%). Without the regime, they would pay €1,550 (25%) - more than double.

The question is no longer "how many years does the contract last". It has become "how much is the rent": up to €2,300/month, the rate is 10%.

Full exemption: the Simplified Affordable Rental Regime (RSAA)

Beyond the 10% rate, there is an even more advantageous tier. The RSAA, in force since June 2026, exempts the landlord from IRS on rent received, provided that:

• The rent does not exceed 80% of the median value per m² in the municipality where the property is located;
• The contract has a minimum term of 5 years;
• The property is in a high-pressure rental market area - this includes the Lisbon and Porto metropolitan areas, the Algarve and several medium-sized cities.

This regime replaces the former Affordable Rental Programme. Rent limits by municipality and typology are published and updated on the Portal da Habitação, which should always be checked before signing a contract under this regime.

Is it worth opting for aggregation?

It is important not to confuse two things: the deduction of expenses always works the same way, whether the landlord chooses the flat rate or aggregation - the amount subject to tax is always "rent received minus deductible expenses". What changes between the two regimes is only the rate applied to that net amount: the flat rate (10%, 25% or 28%) or the standard progressive IRS rates (14.5% to 48%), if the landlord chooses to aggregate the rent with the household's other income.

So, with the 10% rate available in most cases, aggregation only pays off in two specific situations: if the household's total income falls, at most, within the second IRS bracket (where the progressive rate is below 10%), or if, in a given year, expenses actually exceed the rent received - a real loss. In that second case, opting for aggregation that year allows the loss to be carried forward and offset against aggregated rent over the following six years; under the flat rate, a loss-making year simply comes out at zero, with no carry-forward.

Deductible expenses (Category F)

The following expenses, properly documented by invoice, can be deducted from the annual rent:

• Condominium fees;
• Estate agency commission, if applicable;
• The property's IMI;
• Compulsory fire insurance (excludes multi-risk home insurance);
• Conservation and maintenance works in the 24 months before the rental (improvement works, such as a swimming pool, are excluded);
• Energy certificate.