How does renting affect my tax return?
March 5, 2024 | 50,00 EUR | answered by Tina Ullmann
Dear tax consultant for real estate taxation,
My name is Erik Rüppel and I own a property that I would like to rent out. In the past, I used the property myself, but now I want to rent it out to generate additional income. My question concerns how this rental will affect my tax return.
Currently, I am unsure if I have to pay taxes on the rental income and what tax advantages or disadvantages could result from it. I am also interested in knowing if I can deduct certain expenses related to the rental for tax purposes. How will these expenses be taken into account in the tax return and what receipts do I need to keep for this?
Furthermore, I am concerned about whether I may have to make tax payments or if I can expect tax refunds. What factors play a role in this and how can I plan my taxes optimally to avoid financial burdens?
I would greatly appreciate it if you could explain to me in detail how renting out my property will affect my tax return and what steps I should take to benefit optimally from the tax perspective of renting out my property.
Thank you in advance for your support and advice.
Sincerely,
Erik Rüppel
Dear Mr. Rüppel,
Thank you for your inquiry regarding the rental of your property and the tax implications associated with it. It is understandable that you are unsure and have questions about this. I am happy to explain in detail how the rental will affect your tax return and what steps you should take to benefit optimally from the rental in terms of taxes.
First and foremost, rental income must be reported in your tax return. It is treated as income from renting and leasing (§ 21 EStG) and is subject to income tax. Rental income is taxed after deducting certain deductible expenses. Deductible expenses are expenses incurred in connection with the rental and can be claimed as tax-deductible.
Deductible expenses include, for example:
- Costs for maintenance and repairs of the property
- Building insurance and property taxes
- Administrative costs, such as account maintenance fees
- Depreciation on the acquisition and production costs of the property
- Interest on loans taken out to finance the property
These deductible expenses reduce your taxable rental income and therefore your tax burden. It is important to keep all receipts and documentation for the incurred deductible expenses carefully in order to claim them in your tax return.
Regarding potential tax payments or refunds, this depends on various factors such as your personal income situation, tax class, and other tax-relevant aspects. To avoid financial burdens, it is advisable to plan the tax implications of the rental in advance and take tax-reducing measures if necessary.
I recommend that you consult with a tax advisor specialized in real estate taxation to receive individual advice and plan your tax matters optimally. Professional advice can help you take advantage of tax benefits and minimize financial burdens.
I hope that this information has been helpful to you. If you have any further questions, please feel free to contact me.
Sincerely,
Tina Ullmann
Tax Advisor for Real Estate Taxation
