Can I offset my rental losses against other income?
February 29, 2024 | 40,00 EUR | answered by Petra Höfer
Dear tax consultant team,
My name is Ella Krebs and I have been a landlord of a condominium for several years. Unfortunately, in the past few years I have consistently experienced losses from rental income, as the rental income does not cover the operating expenses. This has caused me some concerns about my financial situation and I am wondering if it is possible to offset these rental losses against my other income.
Currently, the rental income from my property amounts to 10,000 euros annually, while the operating expenses such as interest, depreciation, and maintenance costs total around 15,000 euros. This results in a loss of 5,000 euros per year. My other income from employment amounts to 30,000 euros annually.
My concern is that I may be disadvantaged tax-wise due to the rental losses and therefore may have to accept financial losses. Therefore, I would like to know if it is possible to offset the rental losses against my other income in order to reduce my tax burden.
What are the options for offsetting the rental losses against my other income? Are there any specific tax regulations that could help me in this situation? How can I best proceed to improve my financial situation and reduce my tax burden?
Thank you in advance for your help and support.
Sincerely,
Ella Krebs
Dear Ella Krebs,
Thank you for your inquiry regarding offsetting rental losses with other income. It is understandable that you are concerned about your financial situation, especially if the rental income does not cover the expenses. I would like to help you by providing some options to improve your tax situation.
In general, it is possible to offset rental losses with other income to reduce the tax burden. This is referred to as "income compensation" in tax law. In your case, with rental income of 10,000 euros and expenses of 15,000 euros, there is a loss of 5,000 euros. Since your other income from employment is 30,000 euros annually, you could offset this with the rental loss.
To offset the rental losses with other income, you need to file an income tax return with the tax office. In the attachment V of the tax return, you can declare the rental income and claim the expenses. The tax office will then determine if a loss has occurred and if it can be offset with other income.
However, there are certain tax regulations that you should be aware of. For example, there is a restriction on offsetting losses from rental with other income. This restriction mainly applies to landlords who rent their property only temporarily or do not consider rental income as business income. In your case, as the landlord of a condominium, you should check if these restrictions apply to you.
To improve your tax situation and reduce your tax burden, I recommend seeking advice from a tax advisor. A tax advisor can help you maximize all tax opportunities and optimize your finances. They can also help you optimize your expenses and take advantage of possible tax benefits.
I hope this information has been helpful to you. If you have any further questions, please feel free to contact me.
Best regards,
Petra Höfer, Tax Advisor
