Deducting renovation work on the rented property for tax purposes.
March 8, 2012 | 20,00 EUR | answered by Michael Herrmann
Our taxable income has been around 35,000.00 euros (fluctuating slightly due to varying additional income).
In 2012, we will earn rental income amounting to 13,800.00 euros annually.
A renovation costing approximately 15,000.00 euros is planned.
Question: Is it advantageous to carry out this renovation in 2012 to save on taxes? And if so, should these renovation costs be deducted from taxes over 1, 2, or 3 years?
Thank you for your response!
Dear inquirer,
First of all, thank you very much for your inquiry, which I am happy to answer based on the information provided and in the context of your initial consultation. The response is based on the facts presented. Missing or inaccurate information regarding the actual circumstances can affect the legal outcome.
There does not seem to be any significant saving potential in 2012. It would be advisable to carry out the renovation this year if significant tax reductions were planned for 2013 onwards, or if your income increases significantly, thus affecting the tax rate of the reduced income due to the expenses. Neither of these scenarios appear to be present in the facts provided. Therefore, the timing of the investment will not impact the tax result.
It is worth considering the distribution of expenses, as a progression advantage can be obtained by deducting only a portion each time, resulting in a higher tax saving in a more favorable tax bracket. However, this effect is diminished by the interest effect, as the tax payment is only reduced later. According to your information, the expenses should not be spread out over more than two or three years.
I hope that these explanations have provided you with a sufficient overview of the situation within the scope of your inquiry and this initial consultation, and I remain
Yours sincerely,
Michael Herrmann
Tax consultant
Diploma in Business Administration (FH)
