Housing crisis in Portugal: 2026 tax incentives for room rentals

The housing crisis in Portugal has been a major concern for several years. Faced with soaring property prices in Lisbon, Porto, and the Algarve, finding affordable accommodation has become a real obstacle course for young professionals and students. At Roomlala, we closely observe these developments to support you as best we can. That is why we welcome with great interest the recent government measures aimed at easing this pressured market.

On 20 May 2026, the Portuguese government reached a decisive milestone with the publication of Decree-Law no. 97/2026. This text introduces unprecedented tax incentives to encourage hosts to open their doors and offer long-term rentals. If you have an empty room, this is the perfect time to consider a homestay. Not only are you helping to resolve a national crisis, but you also benefit from considerable financial advantages.

Read also: Regulations in British Columbia: The long-term room rental boom in 2026, Local accommodation and high-demand areas: The new rules boosting long-term rentals in Portugal in 2026 and Fraud in temporary leases in Spain: The new 2026 rules that secure long-term shared housing

In this article, we explain this new tax package for you. From the drastic reduction in tax on your rental income to the benefits you can highlight to your future tenants, we show you how to take advantage of these new rules. Get ready to optimise your tax position while renting out your room safely with Roomlala.

Understanding the May 2026 Decree-Law: A turning point for hosts

The drastic reduction of IRS from 25% to 10%

The flagship measure of Decree-Law no. 97/2026 is undoubtedly the spectacular reduction in the tax rate on rental income (IRS). Until now, income from renting rooms was taxed at a flat rate of 25%. Since this new law came into force, this rate has been lowered to just 10% for so-called "moderate" rents. This is a real tax revolution for hosts in Portugal.

To benefit from this advantageous 10% rate, the monthly rent for the room (or accommodation) must not exceed the ceiling of €2,300. This ceiling has been designed to cover the vast majority of homestay rentals, even in the most sought-after neighbourhoods of Lisbon or Cascais. The State's objective is clear: to reward hosts who charge reasonable prices and contribute to the national housing effort.

Let's take a concrete example to illustrate this benefit. Use case: Maria owns a large flat in Porto and rents a room to a young worker for €400 per month. Before 2026, on her €4,800 of annual income, she paid €1,200 in tax (25%). Today, thanks to the new 10% rate, she only pays €480. That is a net saving of €720 per year, simply by complying with the new guidelines.

At Roomlala, we strongly encourage you to review your room rental pricing to ensure it falls within these criteria. This tax cut more than compensates for any moderation in your rent, while guaranteeing that you will find a tenant much faster given the ever-increasing demand.

Strict lease duration conditions (3 years minimum)

Please note, this tax gift is not granted without strings attached. To combat housing insecurity and curb excessive tenant turnover, the law imposes a strict duration condition. For your rental income to be taxed at 10%, the residential lease contract must be signed for a minimum duration of 3 years.

This measure aims to stabilise the long-term rental market. By committing to three years, you offer invaluable security to your tenant, who can thus settle into their neighbourhood, work, or studies without the fear of having to move the following year. In return, the Portuguese State guarantees your tax advantage for the entire duration of the lease.

Use case: João, a pensioner living in Faro, wants to rent out the room of his son who has gone abroad. He decides to sign a 3-year contract with a nurse from the local hospital. Even if the tenant decides to leave before the end of the 3 years (respecting the legal notice period), João will have benefited from the reduced 10% rate for the entire effective duration of the rental, because the initial contract met the formal condition imposed by the law.

We know that committing to 3 years can be daunting for some hosts. However, keep in mind that Portuguese law provides for early termination clauses for the tenant, and guarantees for the host in the event of non-payment. At Roomlala, the quality of verified profiles allows you to approach this long-term rental with great peace of mind.

Declaring your income and optimising your tax in Portugal

Category F and registration on the tax portal (AT)

Legality is the key word for taking advantage of these incentives. In Portugal, income from renting a homestay room falls under Category F (Rental Income / Rendimentos prediais). For the tax authority (Autoridade Tributária e Aduaneira - AT) to apply the famous 10% rate, you must follow a rigorous administrative procedure.

Everything starts with the registration of your rental contract. You are obliged to declare the contract on the Portal das Finanças (the AT portal) within 30 days of it being signed. This registration will result in the payment of Stamp Duty (Imposto do Selo), which corresponds to 10% of the value of one month's rent.

Next, you will have to issue monthly electronic receipts (recibos de renda eletrónicos) via this same portal. Here are the key steps to follow:

• Create the written contract expressly mentioning the rental of a room (and not the entire home).
• Register the contract on the Portal das Finanças with the tenant's details (NIF is mandatory).
• Issue the electronic receipt for each payment received.
• Declare all this income during your annual IRS declaration (Annex F).

Concrete example: Ana, a Roomlala host in Coimbra, found her student tenant on our platform. Upon handing over the keys, she logs on to the AT portal, registers the 3-year lease, and generates her first receipt. Thanks to this rigour, the Portuguese tax office will automatically apply the reduced 10% rate during her next tax declaration. We advise you to be assisted by an accountant (contabilista) for the first year to avoid any input errors.

Be aware of non-deductible charges

This is a crucial point of vigilance that we would like to highlight at Roomlala. In homestay rentals, it is very common to offer an "all-inclusive" rent (water, electricity, gas, internet). It is practical for the tenant and simplifies day-to-day management.

However, from a tax perspective in Portugal, current consumption charges (water, electricity, gas) are not deductible from your Category F rental income. Only certain structural expenses (such as condominium charges, IMI, or building maintenance work) can be deducted if you were renting out the entire home, but for a room with charges included, the rule is strict.

Use case: Pedro rents a room in Lisbon for €500 per month, specifying that €50 covers water and electricity. Tax-wise, Pedro will be taxed on the full €500, not on €450. He cannot deduct his EDP (electricity) or EPAL (water) bills from his rental income.

Our advice for optimising your situation: calculate your base rent so that it absorbs these non-deductible charges while remaining attractive, or establish a rent excluding charges and ask for a separate flat-rate contribution, although the first option remains the simplest to manage in the long term. Be transparent with your tenant from the start.

The benefits for your tenants: A golden rental argument

Increase in tax deductions for classic tenants

The 2026 incentives do not stop with the hosts. The government has also thought of tenants, which constitutes a fantastic commercial argument for you, the hosts. By renting out your room in a declared and legal manner, you allow your tenant to benefit from significant tax deductions on their own IRS.

The tax deduction ceiling for rent for tenants rises to €900 for the 2026 tax year, and will even reach the symbolic mark of €1,000 in 2027. This means that a tenant can deduct a significant portion of the rent paid to you from their taxes, provided of course that you have issued the famous electronic receipts on the AT portal.

Use case: Lucas is a young French professional expatriated to Lisbon. He rents a room from a Portuguese host for €450 per month. Thanks to the registered contract and the receipts issued, Lucas will be able to deduct up to €900 from his Portuguese income tax in 2026. This is a huge gain in purchasing power for him.

At Roomlala, we notice that tenants are increasingly educated about these issues. By mentioning in your listing that your rental is declared and eligible for IRS deductions, you will attract serious, solvent profiles who are keen to commit for the long term. It is a win-win relationship.

The specific case of displaced students

Portugal attracts a huge number of students, both national and international. For Portuguese students who have to leave their home town to study (the "estudantes deslocados"), the law provides for a particularly generous scheme that greatly facilitates room rentals.

If you rent your room to a displaced student (whose educational establishment is located more than 50 km from their original tax residence), the student's parents can deduct a portion of the rent as education expenses on their own IRS declaration, up to a ceiling of €300 per year.

Use case: The Silva family lives in Braga, but their daughter Sofia is going to study at the University of Lisbon. They rent a room from you for €350 per month. Because Sofia has the status of a displaced student, the Silva parents will be able to deduct up to €300 from their taxes for education expenses. For this to work, you must imperatively indicate on the finance portal that the contract is intended for a displaced student.

This student market is a real gold mine for hosts. On Roomlala, the demand for student accommodation is constant. By knowing these tax rules, you can reassure parents (who are often the guarantors and payers) and close your rentals in record time.

Pitfalls to avoid and legal points of vigilance

The Porta 65 Jovem programme: An exclusion to be aware of

On your journey as a host, you will often hear about the "Porta 65 Jovem" programme. This is a very popular State financial aid scheme in Portugal, intended to help young people aged 18 to 35 pay their rent. Many young tenants might ask you if your room is eligible for this programme.

It is crucial to be clear and precise: the Porta 65 Jovem programme is NOT applicable to the rental of individual rooms. According to IHRU (Instituto da Habitação e da Reabilitação Urbana) guidelines, only entire homes (frações autónomas) are eligible for this grant.

Use case: You are contacted on Roomlala by a young couple who wish to rent your large master bedroom. They ask you if they can use the Porta 65 Jovem to pay for part of the €500 rent. As an informed host, you must explain to them that the law forbids it for rooms. This avoids misunderstandings, false hopes, and last-minute cancellations.

We advise you to be transparent from the very first contact. You can compensate for this ineligibility by reminding the tenant that they will still benefit from the increase in the IRS deduction ceiling (the famous €900 in 2026), which remains a very attractive financial benefit.

Why choose Roomlala to secure your procedures?

Faced with a legal and tax framework that is becoming more complex, renting a room can seem intimidating. Between 3-year contracts, registration on the AT portal, and receipt management, the host's mental load increases. This is exactly where our platform steps in to take the weight off your shoulders.

At Roomlala, we secure the first, most crucial step: the initial connection and payment. We verify tenant profiles, we secure the payment of the first month's rent, and we offer you an integrated messaging system to discuss legal modalities (such as the issuing of receipts) before even signing the lease.

Use case: By using Roomlala, you can filter requests to retain only those tenants prepared to commit to 3 years (to benefit from your 10% IRS rate). Once the booking is confirmed and the first payment is secured by us, you can serenely move on to drafting your rental contract in compliance with Portuguese law.

In conclusion, the housing crisis in Portugal has pushed the government to offer exceptional tax incentives in 2026. With tax reduced to 10% for 3-year leases, long-term room rental has never been more profitable. By following best practices and using Roomlala to find the ideal tenant, you can transform a simple empty room into a long-term, legal, and highly optimised source of income.