Ask a tax advisor on the topic of Real estate taxation

Rental property financing costs deduction

May 7, 2010 | 15,00 EUR | answered by Michael Herrmann

Dear Sir or Madam,

The 10-year loan for my rented property is coming to an end, and I would like to repay approximately half of it. Almost simultaneously, I will be purchasing a self-occupied property with partial external capital. To what extent is it permissible not to repay the "old" loan for the former apartment without it being detrimental for tax deduction as operating expenses?

I hope the information provided is sufficient.

Michael Herrmann

Dear inquirer,

First of all, thank you for your inquiry, which I would be happy to answer based on the information provided and in the context of your initial consultation. The answer will be based on the description of the situation. Missing or incorrect information about the actual circumstances can affect the legal outcome.

It is not necessary from a tax perspective to restructure external capital on the self-occupied apartment. In order to make as much interest expense tax deductible as possible, you should not repay the loan for the rented apartment at all. When considering the tax deduction for interest expenses, it only matters that the external capital was used to acquire the apartment. Subsequent changes in assets are completely irrelevant.

I hope I have given you an initial overview of the situation and remain

Sincerely,

Michael Herrmann
Diploma in Financial Management
Tax advisor