Ask a tax advisor on the topic of Rental / Leasing

Decision of the tax office correct?

November 5, 2017 | 50,00 EUR | answered by Steuerberater Udo Glinka

Question regarding rental and leasing:
For years, I have rented out a granny flat in my owner-occupied house. In my income tax return for 2016, I declared rental income of EU 408,-- cold rent and a lump sum for utilities of EU 92,-- as income, as I have done in previous years. These total EU 1,104,-- per year.
For the deductible expenses, I have allocated expenses for property tax, garbage collection, water, heating (gas), chimney sweep, insurance, interest on loans, immediate deduction for maintenance expenses, and straight-line depreciation based on the rented living area (35.53%). I calculated the following results using Lexware QuickSteuer:
Rental income including utilities: EU 6,000,-
Deductible expenses: EU 6,021,-, Loss: -EU 21,-
The tax office determined a profit of EU 926,--. The explanation in the tax assessment dated 10.10.17 reads: "The utilities for property tax, garbage, etc. were taken into account in the amount of the received utilities of EU 1,104,--. It is to be assumed that the amounts will be balanced out with the tenant as part of a service charge settlement."
Tax repayment according to the tax office: EU 482, + 27.31 solidarity surcharge = EU 509.31, according to my calculations (Lexware) using the above method: EU 249.78.
Note: I have agreed on a flat rent of EU 500,-- including utilities with my tenant (stepson), as a consumption-dependent utility bill for heating, hot water, and water is not possible due to the lack of measuring devices.

Question: Is the tax office's calculation correct? Does it make sense to file an objection? The deadline is on 10.11.17.

Steuerberater Udo Glinka

Dear inquirer!

Based on the information provided to me, I would like to answer your request as follows.

The tax office seems to have cut your deductible expenses because it assumes a subsidized rental, as the deductible expenses that can be passed on exceed the actual charges you receive from your tenant.

This would be correct if the warm rent you receive is 66% below the market rent.

The legal norm for this can be found in § 21 (2) EStG.

If it is not a subsidized rental in the above sense, it would be advisable to file an objection.

For this, you would first need to determine the market rent in your area.

I hope my explanations have been helpful to you.

Best regards,

Udo Glinka
(Tax Advisor)