Home purchase for personal use - but with income in a transitional period.
February 4, 2020 | 100,00 EUR | answered by Steuerberater Knut Christiansen
Dear Sir or Madam,
the following situation: My wife and I bought and paid for a single-family home for our own use in August 2019. The house is financed by a loan. The transfer of the land register took place in January 2020. Due to a contractual agreement, the previous owners have the right to occupy the house until August 2020, as they are also building a new house and their new house will only be ready for occupancy then. Only then will they move out and we will move in accordingly. For this period between September 2019 and August 2020, the previous owners will pay us a monthly occupancy fee. The occupancy fee is approximately equal to our monthly loan payment.
From this, the following questions arise:
1. Does the occupancy fee have to be taxed as income?
2. If yes, what can we deduct against it? (Purchase price? Additional costs? Loan? Repayment?)
3. When should we have construction work done in order to be able to deduct it? Before the move or after the move? If we have to tax the income from the occupancy fee, are all expenses deductible?
4. Is there any other advice we should consider?
Thank you very much!
Good evening and thank you for using frag-einen.com!
I would like to answer your questions as part of an initial consultation as follows:
In principle, by renting out the property for a fee, you generate income from renting and leasing. Therefore, you must declare the income in Annex V as part of your income tax return. You can generally deduct related expenses as advertising costs. Specifically, you should mention interest and depreciation that occur during the rental period. Regarding depreciation, you need to divide the acquisition costs of the property into a portion for land and building structure. The Federal Ministry of Finance offers a calculation tool for this purpose online. The reason for this is that you can only depreciate the building structure (2% per year, possibly pro-rated per month), while the land value remains constant. Property tax, building insurance, or other fees would also be deductible.
Regarding handyman services/repair costs, the tax office will likely refuse to recognize these as advertising costs within rental income, as they are primarily related to planned personal use and therefore considered privately motivated. Deductible would only be expenses directly related to the rental. Therefore, I would advise waiting with maintenance work until the current owners have moved out. Then you could definitely claim the expenses (labor costs) within the handyman services up to 6000 EUR (§ 35a EStG). You would then receive a tax bonus of 20%, but max. 1,200 EUR. Since amounts over 6,000 EUR are not carry-forwardable, you should consider spreading the payments over 2020 and 2021 if possible. This way, you could potentially save exceeding labor costs for craftsmen for the next year.
I would also like to point out the new § 35c EStG, which allows for significant tax benefits for energy-related measures on the property, provided they are properly certified. The property must be at least 10 years old to claim these benefits. You can find the section here: https://www.gesetze-im-internet.de/estg/__35c.html
I hope I have answered your questions, if not, feel free to contact me again.
Please note that this forum cannot replace personal advice. Missing or incomplete information can change the legal outcome.
Best regards,
Knut Christiansen
Tax advisor
