The Argentina international arrived at Liverpool from Brighton & Hove Albion last summer, and he has represented the Reds on 45 occasions this season, scoring six goals and registering seven assists.
Mac Allister has scored four goals and registered five assists in 32 Premier League matches this term, while he has also contributed two goals and two assists in 13 outings in the Europa League, FA Cup and EFL Cup.
The 25-year-old has a contract at Anfield until June 2028, but according to journalists Marcelo Benedetto and Juan Carlos Pasman, there is a release clause of €70m (£60m) in the deal.
The buy-out fee is allegedly relatively unknown, but Real Madrid are aware, and the Spanish giants are believed to be considering triggering the clause to bring him to Bernabeu.
Real Madrid 'keen to bring Mac Allister to Bernabeu'
A transfer this summer is seen as highly unlikely, but Real Madrid could reportedly make a move for the World Cup winner during next summer's transfer window.
Mac Allister made 112 appearances for Brighton, scoring 20 times and registering nine assists in the process, ahead of his move to Liverpool last year.
The Argentine has proven to be a vital player for Jurgen Klopp's side during the 2023-24 campaign, but the alleged presence of a release clause has placed the Merseyside team in a tough position.
Mac Allister played a vital role in his country winning the 2022 World Cup, and he has also gained European experience this season in the Europa League.
Kroos, Modric are entering latter stages of careers
Toni Kroos and Luka Modric are both expected to sign new one-year deals at Bernabeu to remain with the La Liga champions until the summer of 2025.
However, it is unlikely that either will be at the club for the 2025-26 campaign, which will lead to Real Madrid bringing in at least one central midfielder at the end of next season.
Real Madrid are well-stocked in the middle, with Eduardo Camavinga, Federico Valverde and Aurelien Tchouameni all vital players for the club, while Jude Bellingham could eventually settle into a midfield role despite largely operating as a number 10 this season.
The departures of Kroos and Modric will hit the club hard, though, with the pair inspirational players for the capital giants both on and off the field.
Real Madrid are not expected to be overly active during this summer's transfer window, but Kylian Mbappe is set to arrive on a free transfer from Paris Saint-Germain.