Ask a tax advisor on the topic of Income tax return

Income tax for secondary income and personal loan

December 28, 2011 | 30,00 EUR | answered by Dr. Yanqiong Bolik

In 2010, I granted the owner of a horse pension stable a private loan of approximately 17,000 euros for the construction of a stable building where my horses were then housed. In 2010, around 1,000 euros of interest accrued (for the following years, we agreed on an interest-free loan).

Additionally, I myself helped with the construction of this stable (without being officially employed by the stable owner), for which we had agreed on approximately 3,000 euros in wages. I did this in addition to my regular job (employee) and did not register a business - it never occurred to me that there could be tax issues; it was simply meant as assistance.

The repayment of the loan has been ongoing since September 2010 and will continue for another 2-3 years. I have not yet received the interest (1,000 euros) or the wages (3,000 euros), but will receive them over the next few years.

Therefore, my questions are:

1) In which year should the interest (1,000 euros) and wages (3,000 euros) be taxed: in 2010, because I received them formally, or in the year in which I actually receive the money? If I had to pay taxes on them in 2010, that would mean paying taxes on money I have not yet received.

2) How do I report the wages on my tax return? Since I did not register a business and typically only have income from "non-self-employed work," I am unsure which form and format to report this on.

3) I have already filed my 2010 tax return without considering that taxes may be due on these earnings. How can I rectify this and report the additional income?

Dr. Yanqiong Bolik

Dear questioner,

Thank you for your inquiry, which I am happy to answer taking into consideration your input and the rules of this platform.

Please note that my explanation is based on the facts presented, and that adding, omitting, changing information or the ambiguity of information can change the tax result.

1)

Interest income is part of capital income. It is taxable in the year in which it is received, i.e. when you receive the interest. The payment for temporary help, in my opinion, does not constitute business income as you are not engaging in it sustainably with the intention of making a profit. It falls under other income from services according to §22 No. 3 Income Tax Act. Such income (= receipts - advertising costs) is only subject to income tax if it amounts to at least 256 euros in the calendar year. Other income is also taxable in the calendar year in which it is received.

2)

According to current law, other income as defined in §22 No. 3 Income Tax Act should be reported in Annex SO: income in line 7 and advertising costs in line 11.

3)

Since you have not received any interest payments or payment for temporary help in 2010, you do not need to report anything in this regard.

I hope I could help you.

If there is still any uncertainty, please feel free to use the follow-up function.

Best regards,
Dr. Yanqiong Bolik
Tax advisor
Bildstöckle 6, 70567 Stuttgart
Tel: +49 (0)711 / 9332 2657
Email: info@zdbz.de
www.steuerberatung.zdbz.de