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Modernization costs office in your own private house

May 7, 2010 | 15,00 EUR | answered by Dipl.BW/SB Ulrich Stiller

Dear Sir or Madam,

I am a self-employed business owner (consulting office/trade agency) and I own a 280-year-old property in which I do not live myself, but rent out approximately 80% as a residence and use the remaining 20% (about 30m2) as an office for my business. Therefore, all the operating costs related to the house are not eligible for input tax deduction, as the house is considered personal property, not business property.

I have been booking all the operating costs of the house, as well as depreciation and minor repairs, privately. During the annual accounting process, I allocate them proportionally as miscellaneous room costs, as I do not book any rental costs, etc.

In April 2010, I carried out some renovation/modernization work in the office, such as installing underfloor heating, laying heating pipes in the floor, tiling, electrical work, plastering, and installing an additional stove, etc.

My question is: How should I book these construction works that only concern the office portion of the house (partly awarded to companies, partly only material costs and own work)?

1. Can I directly book the receipts in the ongoing accounting as operating costs (renovation costs) since they only concern the part of the house used as an office, or do I have to continue booking them as personal costs related to the house and then allocate them as before annually?

2. If the first case is applicable, could I then immediately claim the input tax from these receipts that only concern the office within the ongoing monthly accounting?

Yours faithfully

Dipl.BW/SB Ulrich Stiller

Dear inquirer,

Thank you for your inquiry, which I would like to answer based on the information you provided and considering your efforts in the context of an initial consultation as follows:

Question 1

If the expenses you mentioned relate EXCLUSIVELY to the office, they can be directly attributed to the office, and there is no need for a proportional allocation. Self-provided services, for example, cannot be considered with a fictitious salary, but the material costs incurred can.

Question 2

If you are entitled to input tax deduction, you can deduct the input tax and include it in your current VAT return in the monthly accounting.

Best regards,

Ulrich Stiller
Tax consultant