Renting out a workspace to a spouse in a condominium owned by the couple.
Renting a home office to spouse in condominium
Dear tax expert,
I work as an employee (salary approx. 110,000 €). My wife works as a self-employed marketing service provider (profit approx. 50,000 €) and works exclusively from home. We intend to move to Berlin for professional reasons. There, I plan to buy an apartment where we will live together. I will be the only one appearing as the buyer (financing, land register, purchase contract, etc.).
I would like to have an assessment on the following consideration:
The apartment will have a separate room for my wife's home office ("office"), which can also be locked separately, but access is only possible through the apartment (so a completely normal room). As the owner of the apartment, I would like to rent out the room to my wife for her self-employed work. She could deduct the rental expenses from her profit. My property is primarily used for personal purposes. However, I could also deduct the corresponding advertising costs in proportion to the rental. With an estimated size of the apartment of approx. 100 m², an estimated share of 20% would apply to the office to be rented out, which in turn corresponds to approx. 5,000 € in annual advertising costs (depreciation, interest, operating costs). With the same rent (possibly plus a small profit margin for security), I would not make any profit and my wife would have less taxable profit. The price also seems to be market-oriented (24 € per m² warm).
Questions:
1) Is such a design generally accepted for tax purposes (assuming the existence and execution of appropriate contracts)? Or does something stand in the way of such "commercial" rental of parts of a self-used property? Assumption: no joint assessment.
2) To determine the advertising costs from V+V: Are there common principles for determining the eligible share? For example, my 20% would be 20m² office / 100m² total area. However, it would be more advantageous to divide the office by living space (e.g. without kitchen, bathroom, hallway). One could argue that these areas can also be used by the tenant of the office during work.
3) If it is generally accepted, what evidence/documentation needs to be provided to the tax authorities (in the rental contract as well as an explanation for the tax office (e.g. lockable office)?
4) Is joint assessment harmful in this case? I have a higher income, which means a higher tax rate. My wife's income is also somewhat more volatile. Joint assessment would therefore be desirable.
5) Is there a risk that the apartment (in case of joint assessment) will inevitably (partially) become part of the business assets, meaning I cannot do anything about it?
Thank you in advance.
