What tax implications does the division of a property into multiple residential units have?
July 7, 2024 | 50,00 EUR | answered by Tatiana Seiler
Dear tax advisor,
my name is Verena Hacker and I recently acquired a property that I would like to divide into multiple residential units. I am faced with the decision of whether to rent out the property or use it for myself. I am concerned about the tax implications of this division.
Currently, the property is one unit that is rented out as a whole. By dividing it into multiple residential units, I could potentially generate higher rental income. However, I am unsure of how this division will affect my taxes.
My worry is that dividing the property into multiple residential units could lead to a higher tax burden. I am wondering if as the landlord of multiple residential units, I will have to pay additional taxes and how the division will affect my income tax.
Could you please explain to me the tax implications of dividing a property into multiple residential units? Are there any tax advantages or disadvantages that I should consider in my decision? What options are available to optimize the tax burden?
I would greatly appreciate your help with this question, as I am looking to make an informed decision about the future use of the property.
Thank you in advance.
Sincerely,
Verena Hacker
Dear Mrs. Hacker,
Thank you for your inquiry regarding the tax implications of dividing your property into multiple residential units. As a tax consultant specializing in real estate taxation, I can understand your concerns and will be happy to explain in detail the tax aspects you should consider in your decision.
First and foremost, it is important to understand that renting out properties is generally subject to taxation. Rental income is subject to income tax and must be reported in the tax return. By dividing your property into multiple residential units, the potential rental income may increase, leading to a higher tax burden. The more units that are rented out, the higher the income that must be taxed.
However, there are also tax benefits to consider when dividing your property. For one, you can deduct the costs of dividing and modernizing the residential units for tax purposes. These costs reduce your taxable income and therefore decrease your tax liability. Additionally, you can also claim depreciation on the acquisition and production costs of the property, which can also result in tax savings.
There are also ways to optimize the tax burden. One option would be to not rent out the property yourself, but to rent it out through a leasing company. This allows you to benefit from tax advantages such as the possibility of depreciating buildings or claiming input tax deductions. Additionally, you should consider the possibility of tax-optimized financing of the property to minimize your tax burden.
In conclusion, it is important to seek individual advice from a tax consultant to fully understand the tax implications of dividing your property and make an informed decision. I am available for a personal consultation and can help you find the optimal tax structure for your property.
Sincerely,
Tatiana Seiler
Tax Consultant
