Deductibility of costs for acquisition of land when renting out
February 1, 2010 | 30,00 EUR | answered by Michael Herrmann
I want to rent out my house built in 1980 on a leasehold plot. The house is fully paid off now, but I bought the land for 240,000 euros just under two years ago. I took out a mortgage (as part of the financing) for that.
1.) Can I deduct the interest on the mortgage for the land?
2.) How do I determine the depreciation allowance (AfA)? The land probably does not factor into that. I no longer have any meaningful documentation about the costs of building the house.
3.) I carried out extensive renovation work two years ago, mostly done by myself. Can I claim any of that?
Dear inquirer,
First of all, thank you very much for your inquiry, which I would like to answer based on the information provided and in the context of your commitment during an initial consultation. The response is based on the description of the situation. Missing or incorrect information about the actual circumstances can affect the legal outcome.
1.) The interest on the loan for the property is deductible from the point of intention to rent, provided there is no personal use. The decisive factor is the time of payment.
2.) The depreciation for buildings used for residential purposes is usually 2% of the construction costs. The acquisition costs of the land are not deductible as land does not depreciate. It is problematic that you no longer have receipts for the expenses. The tax office does not accept expenses without receipts. In exceptional cases, self-made receipts and estimations are permissible. You should gather as many receipts as possible and prepare a coherent presentation.
3.) According to § 84 b)(1) of the income tax implementation regulation, the taxpayer can distribute "larger expenses for the maintenance of buildings that are not part of business assets at the time of the maintenance expenses and primarily serve residential purposes, evenly spread over two to five years, contrary to § 11 para. 2 of the law." A building primarily serves residential purposes if the floor area of the rooms serving residential purposes in the building is more than half of the total usable area. Garages belonging to the building are to be treated as serving residential purposes without regard to their actual use, as long as no more than one car per apartment in the building can be parked there. Rooms for additional cars are always treated as not serving residential purposes."
The maintenance expenses can therefore be deducted evenly over up to five years, regardless of the year of payment, and a partial amount can still be allocated in the remaining three years.
However, self-performed work is generally not deductible as an expense.
I hope to have given you an initial overview of the situation with this information and remain
Yours sincerely,
Michael Herrmann
Dipl.-Finanzwirt (FH)
Tax Advisor
