Real estate
September 14, 2009 | 15,00 EUR | answered by Oliver Burchardt
Is it more tax advantageous to fully finance an apartment or to have financing interest from financing and savings interest? Because a purchase of an apartment is imminent for the son, 18, still in school then a student, is it important that he lives there? Regards
Dear inquirer,
Thank you for your question, which I would be happy to answer as part of an initial consultation.
The tax advantage of buying real estate essentially depends on whether you use the apartment to generate income.
In this case, all expenses (including interest) are tax-deductible advertising costs.
The tax advantage is therefore based on the fact that you generate income from renting out the apartment.
In principle, you can also generate income from renting and leasing when your son lives in the apartment. However, the tax authorities have high requirements for contracts between close relatives, in particular, it must be clearly proven that the contract has actually been carried out. In this case, you must declare rental and leasing income in your income tax return, which you can offset against expenses. This could result in a higher overall tax burden for you if the income exceeds the costs.
I cannot assess whether this model could be advantageous for you based on the information provided.
If you finance the apartment entirely from savings, the interest payments from these savings will of course be eliminated. Conversely, the elimination of the tax burden will affect these interest payments.
You can receive the appreciation of the property tax-free after the expiration of the speculation period of 10 years. For this reason, financing from savings could be more tax-efficient for you than the model described above.
I hope my explanations have been helpful to you. If not, please use the follow-up function.
Best regards,
Oliver Burchardt
Tax advisor
