Key figures — as of 2026-09-02: IRS rent deduction cap rises from €700 to €900 for rent paid in 2026 (declared in the 2027 IRS campaign) — rising again to €1,000 for rent paid in 2027 — under Decree-Law 97/2026, published 20 May 2026; the deduction remains 15% of annual rent paid, capped; landlords on "moderate rent" contracts (≤ €2,300/month) see their autonomous IRS rate cut from 25% to 10%.
What's changing, and why it matters now
Tenants renting their permanent home in Portugal will be able to claim up to €900 off their IRS bill for rent paid during 2026, up from the €700 ceiling that applied to 2025 rents. For tenants, the change is a gradual increase in the annual IRS deduction for rents on their main and permanent home, from EUR 700 under the previous rules to EUR 900 in 2026 and EUR 1,000 from 2027 onwards. The mechanics haven't changed — you still deduct 15% of what you paid in rent over the year — but the ceiling that was quietly squeezing higher-rent households has finally moved.
The measure sits inside a broader package. Published in the Official Gazette on 20 May 2026, Decree-Law 97/2026 implements the Housing Package — tax relief measures and incentives aimed at increasing housing supply, lowering construction costs, and boosting affordable rentals in Portugal. The changes to the IRS Code, provided for in Article 13 of the decree, set the maximum limit for rental deductions from IRS tax liability at €900 for 2026.
For anyone filing an IRS return in Portugal as a tax resident — which includes most foreigners on a D7, D8 or work-based residence permit who cross the 183-day threshold — this shows up in the April–June 2027 filing window, on income and expenses from calendar year 2026.
Why most expat tenants in Lisbon and Porto will hit the cap
The 15% rule matters less than it sounds for renters in the two big cities. Do the maths: a €900 cap is reached once annual rent hits €6,000, or €500 a month. Despite the increase in the maximum ceiling, the IRS for rents only allows full deductions for rents up to €500 per month in 2026 — those paying higher rents will reach the annual deduction limit of €900.
Since a T1 or T2 in central Lisbon or Porto routinely rents well north of €500 a month, the overwhelming majority of expat tenants were already maxing out the old €700 cap — meaning the real-world change is simple: an extra €200 back at tax time, regardless of whether rent is €900 or €2,900 a month. That's GrowIN's own calculation from the published figures, not a government estimate, and it's the number that actually lands in a foreign tenant's pocket: roughly €16.70 a month in additional tax relief, spread across the year but paid out as a lump sum in the IRS refund cycle.
"A €200 bump in the deduction cap sounds generous until you realise most Lisbon and Porto renters were already capped out — the real gain is modest, and it only shows up a year later," says GrowIN Portugal Editorial.
The fine print that trips up foreigners
The deduction is not automatic just because you pay rent. It applies specifically to rent on a main and permanent home, and the lease agreement needs to be reported to the Tax Authority for the benefit to have any practical effect. Two things commonly disqualify foreign tenants:
- Informal or unregistered contracts. A landlord who takes cash and never issues an electronic recibo de renda through the Finanças portal leaves the tenant with nothing to claim, no matter how much rent was actually paid.
- Non-resident status. The deduction is a dedução à coleta on an IRS return — it only helps if you're filing as a Portuguese tax resident. Short stays, or renting while still tax resident elsewhere, don't qualify.
Landlords get their own incentive to formalise. For landlords, the most significant change is a stand-alone 10% IRS rate for rental income from leases used exclusively for housing, provided the monthly rent does not exceed the "moderate rent" ceiling of EUR 2,300 for 2026, earned up to 31 December 2029. That's a steep cut from the standard 25% rate, and it should, in theory, push more landlords toward registered contracts with proper receipts — which is exactly what tenants need to claim the deduction.
What to watch next
The €900 cap applies to rent paid across all of 2026; the jump to €1,000 kicks in for 2027 rents, filed in 2028. Renters should keep every rent receipt and confirm the lease is registered with Finanças well before the 2027 filing season opens — don't wait until April to discover the contract was never communicated. For a full walkthrough of Portuguese tax residency, filing deadlines and what counts as deductible, see our tax & NIF hub.
None of this changes who qualifies as a tax resident, and it's not a substitute for professional advice on your specific situation — outcomes on any IRS deduction depend on how Finanças processes your individual return.