With eyes fixed on 1 July 2026, property owners are facing a major dilemma: declare the income they receive from renting out their properties or remain silent. The new tax reform leaves no room for “grey” areas, effectively turning electronic payments into a one-way street for safeguarding the viability of property investments.

As Brief reports, the Ministry of Finance, aiming to inject approximately €150–€200 million into public finances, is setting up a carefully calibrated “trap” that combines incentives with penalties.

On the one hand, it offers horizontal tax deductions for insurance premiums and “green” upgrades, without income criteria. On the other, it cuts all tax relief, including the long-standing 20% deduction, for those who continue to collect rent in cash.

In this new landscape, landlords who declare their income and adopt digital payments emerge as winners, while those who remain in the shadow economy will be required to bear the cost of full taxation on their gross rental income.

The reform introduces, for the first time, horizontal deductions that depend not on how much you earn, but on how you protect and upgrade your property.

The €500 “Horizontal” Deduction

Every homeowner—whether for a primary residence, holiday home, or rental property—is entitled to an annual deduction of up to €500 from taxable income for insurance premiums covering natural disasters (earthquake, fire, and flood), regardless of income level.

“Green” Gains for Property Owners and Businesses

If you decide to proceed with an energy upgrade of your property (even if it is rented out), the state effectively “returns” part of your investment through enhanced capital allowances. In practice, you can deduct from tax a percentage exceeding 100% of the actual cost, significantly reducing your taxable profit.

1 July 2026: The Turning Point

This is where the major trap lies. From 1 July 2026, for rental income exceeding €500, cash payments eliminate tax relief. If a landlord does not accept rent via bank transfer or electronic means, they automatically lose:

• The standard 20% deduction (for maintenance and wear and tear) on gross rental income

• Capital allowances for renovations and energy upgrades

• Recognition of insurance premiums as a deductible expense

At a time when the Special Defence Contribution on rental income has been abolished, compliance with electronic payments is the only way to benefit from the new tax incentives.

For the Insurance Premium Deduction (€500)

• Insurance policy: Must explicitly include coverage for earthquake, fire, and flood

• Proof of payment: Payment must be completed within the tax year and show the transaction date

For Rental Properties (Amounts Over €500)

• Bank statement: Proof of transfer or deposit showing the tenant’s name and transaction description (e.g. “Monthly Rent”)

• Rental agreement: Copy of the contract already submitted and stamped by the Tax Department

For Energy Upgrades (Capital Allowances)

• Invoices and receipts: From contractors or suppliers (e.g. photovoltaic systems, insulation, windows), clearly stating the issuer’s VAT registration number

• Energy Performance Certificate (EPC): Document showing the property’s energy rating before and after the intervention, substantiating the “green” upgrade

• Form T.F.59: The declaration submitted to claim deductions, ensuring consistency with declared information