What tax aspects do I need to consider when financing a property?
March 28, 2022 | 40,00 EUR | answered by Mia Pilz
Dear tax advisor,
My name is Claudia Knorr and I am about to finance a property. However, I have concerns regarding the tax aspects that need to be considered when financing a property. I have no experience in this area and want to ensure that I take into account all relevant tax considerations to avoid unexpectedly high tax payments.
Currently, I am employed in a permanent position and have a regular income. I plan to use the property for my own purposes and not rent it out. My concern is that I may overlook potential tax pitfalls and as a result, face financial disadvantages. Therefore, I would like to know from you what tax aspects I need to consider in relation to financing a property. Are there any specific considerations for self-users compared to landlords? What tax advantages or disadvantages could arise for me?
I look forward to your expert advice and thank you in advance for your support. With your guidance, I want to ensure that I optimize the planned financing steps from a tax perspective and avoid any unexpected tax burdens.
Best regards,
Claudia Knorr
Dear Mrs. Knorr,
Thank you for your inquiry regarding the tax aspects of financing a property. I am pleased to assist you with your concerns and provide you with important information on this topic.
As an owner-occupier of a property, there are some tax aspects that you should consider. First and foremost, it is important to know that as a homeowner, you do not generate rental income and therefore do not have to pay taxes on rental and leasing income. This is a major advantage compared to landlords who rent out their property and have to pay taxes on rental income.
Another important point is the tax treatment of financing costs. The interest on a mortgage loan can usually be claimed as advertising costs against capital income. This means that you can deduct the interest from your taxes and reduce your tax burden. The repayment of a mortgage loan is also tax-relevant, as it helps you build wealth and achieve long-term tax benefits.
Furthermore, the real estate transfer tax must be considered. When purchasing a property, real estate transfer tax is usually due, which is paid by the buyer. This tax is a one-time burden and must be taken into account when buying a property.
Another important point is potential tax benefits for owner-occupiers of properties. For example, there is the possibility to apply for Baukindergeld if you purchase a home and live there with children. This support can provide you with financial assistance and reduce your tax burden.
Overall, it is important that you carefully examine all tax aspects related to financing a property and, if necessary, seek professional tax advice. This way, you can ensure that you take advantage of all opportunities for tax optimization and avoid unexpected tax burdens.
I hope that I was able to help you with this information and am happy to answer any further questions you may have. Thank you for your trust and your inquiry.
Best regards,
Mia Pilz
