What tax aspects should I consider when renting out real estate?
June 23, 2024 | 40,00 EUR | answered by Paula Köhler
Dear tax advisor,
my name is Ella Netz and I am the proud owner of a rented property. I have decided to make this investment in order to generate passive income in the long term and multiply my capital. However, I am unsure about the tax aspects I should consider when renting out properties.
I am currently in the process of preparing my income tax return for the current year and want to make sure that I can take advantage of all relevant tax benefits. I have already incurred some expenses for renovations and maintenance measures that I would like to deduct for tax purposes.
Furthermore, I am unsure about how to correctly report the rental income in my tax return and whether I can claim various depreciations. The question of VAT liability also concerns me, as I have read that it can play a role in property rentals.
My concern is that I may overlook tax benefits or make errors in tax declaration that could prove costly later on. Therefore, I would like to thoroughly inform myself in advance and ensure that I consider all tax aspects when renting out my property.
Could you please provide me with detailed information on the tax aspects of renting out properties and suggest possible solutions to optimize tax benefits and avoid pitfalls?
Thank you in advance for your assistance.
Sincerely,
Ella Netz
Dear Mrs. Netz,
Thank you for your inquiry regarding the tax aspects of renting out properties. It is very understandable that you would like to be fully informed in order to make the most of all tax benefits and avoid potential tax pitfalls.
First and foremost, it is important to know that income from the rental and leasing of properties generally falls under income from rental and leasing according to § 21 of the Income Tax Act (EStG). This income is subject to income tax and must be reported in your tax return.
You have already mentioned that you have incurred expenses for renovations and maintenance measures. These costs can be claimed as operating expenses and deducted from rental income to reduce your tax burden. Deductible operating expenses also include administrative costs, interest on loans for financing the property, depreciation on the building, and maintenance costs.
Furthermore, you can claim various depreciations, such as linear depreciation for building costs or depreciation for certain furnishings. These depreciations also reduce your tax burden.
Regarding the value-added tax liability for renting out properties, it should be noted that the rental of residential space is generally exempt from value-added tax. However, it may be different for the rental of commercial space, so you should carefully consider whether value-added tax applies.
To ensure that you correctly consider all tax aspects when renting out your property, I recommend seeking advice from an experienced tax advisor. They can help you make the most of all relevant tax benefits and avoid potential errors.
I hope that this information has been helpful to you. If you have any further questions, please feel free to contact me.
Best regards,
Paula Köhler
