Madrid transfer tax (ITP) cut for under-40s: should you wait until 2027?

On 5 October, the Community of Madrid announced a cut in the Property Transfer Tax (ITP) for young people buying their main home. Since the news came out, many buyers are asking the same question: should I delay my purchase until 2027 to pay less tax?

According to the information released by the Community of Madrid:

• ITP (resale homes): the general 6% rate would fall to 4% for buyers under 40 purchasing their main home.
• Price cap: the home may not cost more than €450,000.
• AJD (new builds): stamp duty (Actos Jurídicos Documentados) would fall from 0.75% to 0.4% for the same group.
• Planned entry into force: 1 January 2027.

Important: it is not in force today. The measure will be included in the Community's draft budget for 2027, which still has to go through the approval process. Until the rule is published, we do not know the small print.

Let us run the numbers for a resale home:

• €250,000 → current ITP (6%): €15,000 · announced ITP (4%): €10,000 · Saving: €5,000
• €300,000 → current ITP (6%): €18,000 · announced ITP (4%): €12,000 · Saving: €6,000
• €400,000 → current ITP (6%): €24,000 · announced ITP (4%): €16,000 · Saving: €8,000
• €450,000 → current ITP (6%): €27,000 · announced ITP (4%): €18,000 · Saving: €9,000

It is a significant saving. But it is not the only number that matters.

Until the final text is published, there are doubts that could change everything:

• What if two of you buy and only one is under 40? The reduced rate may apply only to the share of the person who meets the requirement.
• Is the €450,000 cap a hard threshold? Usually, if the price exceeds the cap even slightly, the whole benefit is lost.
• Will there be income, wealth or no-other-home requirements? None have been detailed so far.
• What counts as a main home? It normally requires actually and continuously living there for a minimum period. If that is not met, the tax authority can claim the difference with interest.

It depends on your case, but bear three things in mind:

1. The price may rise by more than you save. In September, home prices in Madrid city were 2.4% higher than a year earlier, according to idealista. On a €300,000 flat, a 2.4% rise is €7,200: more than the €6,000 tax saving. In the southern districts the annual rise has been much higher.
2. The home you like today may not be available tomorrow. Waiting has an opportunity cost, especially if you have found a home that fits what you are looking for.
3. What counts is the date of the deed, not the arras. ITP becomes payable when the sale is formalised, not when the deposit contract is signed.

That is why waiting longer does not pay off: rising prices can wipe out the announced cut.

The option we recommend is to sign the deposit contract (arras) now with a term of about three months, so that the deed is signed in early 2027. That way:

• You lock in the price today, before another rise eats up the tax saving.
• You secure the home you want.
• If the cut comes into force on 1 January, as announced, you can apply the 4% rate when you sign the deed.
• If it does not apply in the end, you will still have bought at a price fixed months earlier.

However, the arras contract must provide for these situations:

• What happens if the cut is delayed or not approved in the terms announced?
• Will the seller accept a three-month period to sign the deed? In exchange for what?
• Is your financing guaranteed on that date? Banks' binding offers expire.

A well-drafted clause can allow you to bring the signing forward, keep the price or withdraw without losing the deposit if conditions change. A badly drafted clause can cost you thousands of euros.

Do not stop buying while waiting for 2027. If you find the right home, negotiate the price, sign the arras now and set the deed for early 2027: you secure the price and, if the cut is in force, the tax saving too. And remember that good price negotiation can save you more than the cut itself.

If you are thinking of buying in Madrid and do not know whether to wait, at Consultor y Abogado we review your case and help you structure the transaction so you pay a fair price. The first consultation is free.

Information based on the Community of Madrid's announcement of 5 October 2026. The measure is pending approval and its final regulation may vary. This article is for information only and is not a substitute for professional advice on a specific case.

Further reading: what taxes you pay when buying a home and what to check before buying a home in Madrid.