Are there any tax benefits if I rent out my property to relatives?
April 12, 2024 | 40,00 EUR | answered by Petra Höfer
Dear tax consultant,
My name is Karl Köhler and I am the owner of a property that I would like to rent out. My question concerns possible tax benefits if I rent out my property to relatives.
The current situation is as follows: I own an apartment in a multi-family house that I have been renting out for several years. I have had tenants who have provided me with regular rental income. Now I am considering renting out the apartment to my nephew, as he is in urgent need of accommodation.
My current status is that I currently do not have precise information on whether there are any tax benefits when renting out the property to relatives. I am concerned that I may have tax disadvantages if I make this decision.
Therefore, my question to you is: Are there any tax benefits if I rent out my property to relatives? What tax aspects do I need to consider in order to avoid problems with the tax office? Are there any specific regulations or restrictions that I need to take into account?
I appreciate your expert advice and thank you in advance for your help.
Sincerely,
Karl Köhler
Dear Mr. Köhler,
Thank you for your question regarding the tax benefits of renting out your property to relatives. It is important to consider some tax aspects in order to avoid potential issues with the tax office.
In principle, it is possible to rent out your property to relatives. However, there are certain regulations and limitations that you should take into account. The rental agreement should be documented in writing to ensure the tax recognition of the rental income. Additionally, the rent should be reasonable to prevent any accusations of hidden profit distribution.
There are several points to consider in terms of tax benefits. If you rent out the property to relatives, you may be able to deduct certain expenses such as maintenance costs, management fees, depreciation on the building, and interest on loans used to finance the property. These costs will reduce your taxable rental income and therefore your tax burden.
Furthermore, under certain conditions, you may benefit from the so-called "family home travel rule." This means that as a landlord, you can deduct the travel expenses of your relatives to the rented apartment from your taxes if they are necessary for work-related reasons.
However, it is important to ensure that renting out to relatives does not lead to renting the property significantly below the market value. Otherwise, the tax office may classify the rental income as a gift or hidden profit distribution and tax it accordingly.
In summary, there may be tax benefits to renting out your property to relatives. It is advisable to seek advice from a tax advisor beforehand to properly consider the tax aspects and avoid potential issues.
I hope this information is helpful to you and I am available for any further questions.
Best regards,
Petra Höfer
Tax Advisor
