I recall we discussed this at length in another thread sometime in the last year or so.
This is complicated and it is hard to pin down an exact answer. Many people have opinions, but often there is a lack of reasoning as to why that opinion is correct and no citations to legal authority.
As I recall, many people believe the 1116 deductions related to the income are foreign-allowed deductions, which would be zero in your case because Spain does not allow any deductions.
I don't think that makes sense, though I could be wrong. Why? Because on the 1116, right after the definitely related subtraction, there is a calculation that also subtracts a portion of the US standard deduction (or itemized deductions). IMHO both subtractions must be of the same thing: i.e. either US deductions or foreign deductions. It makes NO sense to have one or the other.
Also The 1116/I.R.C. 901 FTC doesn't really care about foreign deductions. It cares about foreign TAX. The relevant income is US income from a foreign source ("without the" US). See IRC 861-2 https://www.law.cornell.edu/uscode/text/26/862
Why? Because the US FTC is a credit not for all the foreign tax paid, but a credit against the US Tax paid on foreign sourced income taxed by a foreign country.
To illustrate, say you have foreign source income of $1000. The US tax would be say $200. The foreign tax is say $500. The max us credit you could get would be $200. (This oversimplifies but you get the idea -- the FTC is not to give you a $500 credit. It is to not tax you twice on the same income. Effectively you wind up paying the higher tax, which is almost always the foreign tax.) It doesn't matter if the foreign country gives you a $100 deduction or not. It's the $500 you paid (or accrued) that matters.
(This oversimplifies a bit, the I.R.C. 904 limitation limits the deduction to total US tax * [ US calc foreign-sourced income / US calc global income], so here $200 x [$1000 - US deductions definitely-related - a portion of deductions shared with other income] / taxable US income (i.e. $1000 + all other income after deductions)]
[The foreign deduction absolutely matters if you have multiple types of foreign income because you have to figure out how much of the foreign tax is due to each type, so if the deductions don't apply to some of the income that matters ... the allocation is based on effective tax rates not marginal tax rates, at least in the pub 514 examples.]
For a rental property, it seems to me (again I could be wrong - consult your own CPA/enrolled agent/tax attorney who deals with foreign tax issues everyday) that you should include on the 1116 expenses definitely related the schedule E expenses. You could consider not deducting the expenses. For depreciation that might hurt you upon sale (because you must reduce basis by depreciate "allowed or allowable"). But if you deduct on Schedule E, I think you need to subtract on 1116. If you don't deduct on schedule E, then you will get a larger FTC, but you will also have a larger US tax on the rental income.
In most cases I think you may not be required to take a deduction because the statutory language is "there shall be allowed" not you "shall subtract" ... the passive voice would appear to make it permissive rather than mandatory. However there isn't much authority on this that I can find, so that might be wrong. Some people point to the language in I.R.C. 62 (and others) that seems to define AGI as gross income minus allowed deductions and say you must claim deductions. There are a few cases like the earned-income tax credit and self-employment where the IRS has determined deductions must be taken. https://www.irs.gov/pub/irs-wd/0022051.pdf To come to a firm conclusion would require more research and might not even be possible.
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