Vacant owner-occupied apartment Tax treatment.
December 2, 2019 | 60,00 EUR | answered by Steuerberater Knut Christiansen
I own a rented condominium (2 rooms, 80 sqm), whose lease has now been terminated. So far, the apartment has only resulted in a small surplus for tax purposes, because for social reasons (elderly, befriended lady) I had set a low rent and have not increased it for 15 years: 2.70 €/sqm, rent index: max. 8.70.
I plan to use this apartment as my retirement residence in about five years. Given the rental situation in Berlin (rent cap, severely limited termination possibilities, even for own use), I would prefer to leave the apartment vacant until then - despite the losses that will occur. How can I present this to the tax office?
Questions:
1. How long will the tax office accept a loss from rental (especially management costs) if I do not make any rental efforts?
2. How long (and how long) can I claim a renovation phase? There are no structural measures planned, only extensive cosmetic repairs.
3. Is it useful and possible to rent the apartment at this very low previous rent price to
a. my wife (joint assessment) or
b. a relative as "office space".
(My wife currently earns and will continue to earn low income from freelance work (publications and especially publishing royalties) which have always resulted in a break-even in the income-expenditure calculation (especially because of the home office used up to now in our own house).
4. Or is there a completely different model from a tax perspective that fulfills the above-mentioned objective?
Good morning and thank you for your inquiry! I would like to answer it as follows in a preliminary assessment.
1. If you cannot prove any rental efforts, the tax office may not recognize the losses from my point of view and experience. It may "work out" for a year, but if the tax office subsequently determines the lack of rental intention, it is possible that the losses will be retroactively denied.
2. If no further rentals are to take place, the costs can also no longer be claimed, as they would then be related to private use.
3. Renting at a very low rent carries the risk that the advertising costs will only be partially recognized if the rent is below 66% of the local rent (net rent). Especially when renting to close relatives, this is closely examined and must be indicated in the tax return in annex V. The same applies, by the way, for discounted rentals to a relative. In other words, a discounted rental is generally possible and allowed. But you can then expect lower advertising costs if the agreed net rent is below 66% of the local rent.
If you do not use the apartment, there can of course be no tax consideration of the losses. Thus, vacancy would be possible in principle, but would not bring any tax advantages.
4. A tax arrangement in which you want to claim expenses and generate little or no income is unfortunately not possible beyond the limits described above. So you would have to decide to carry out a somewhat commercially reasonable rental if you want to achieve a full deduction of advertising costs. If certain cosmetic repairs are only carried out shortly before self-use, the tax office will probably not recognize these costs. In this case, the tax office assumes that these costs were incurred in relation to the planned self-use. So if you are planning such expenses, they should be incurred rather at the beginning of the next 5-year period and not only in the 4th or 5th year.
I hope this answers your question, if not feel free to ask additional questions at no cost.
I would like to point out that this forum cannot replace a comprehensive and personal tax consultation, but is mainly intended to provide an initial tax assessment. By adding or omitting relevant information, the legal assessment of your issue could be different.
Best regards
Knut Christiansen
Tax advisor
