Depreciation for subsequently built balcony
July 22, 2012 | 60,00 EUR | answered by Wirtschaftsprüfer André Hintz
Dear Sir or Madam,
In 2011, we added a balcony to the rented attic apartment of our house (built in 1994). How are the costs for the balcony extension (€8000) and window/door unit (€2600) now deductible?
1) Is it mandatory that the balcony and window/door unit must be considered as one measure, or can the window (heavily worn!) also be deducted separately as maintenance expenses? It seems that this may not be possible for the balcony, despite its small size.
2) The balcony extension can be bolted to the house wall and on pillars, and theoretically can be moved with a crane. Could it be considered as a separate asset with depreciation over approximately 10 years, and perhaps also for the window/door unit out of courtesy?
3) The tax office will likely classify the balcony (or both) as subsequent acquisition costs, adding €10,600 to the remaining debt of the rented apartment and then annually depreciating everything at 1.25%. However, the issue is: the balcony, which is prone to rust, will then only be fully depreciated in about 90 years!! The entire house will be depreciated in just 40 years. There must be a more reasonable depreciation solution!
Thank you in advance for your response!
(More detailed data attached)
Dear inquirer,
I would like to answer your question within the scope of an initial consultation and based on your fee commitment, in accordance with the rules of the online portal. My response refers to the situation you have described.
Your construction measures, such as installing the door and adding the balcony, result in subsequent production costs, as it constitutes an improvement to your rented apartment rather than a mere replacement action.
The subsequent production costs increase your depreciation base for the year of commencement of use. That is, you take your original acquisition costs and add the expenses for the door and the balcony addition. The percentage of 1.25% is then applied to this sum.
Furthermore, the new depreciation amount continues to apply once the apartment is fully depreciated on its own. This continues until the subsequent acquisition costs are also fully depreciated. Therefore, the depreciation of the balcony will only take a few years (or months, depending on the total depreciation base) longer than the entire rental property.
If damages occur to the balcony after 10 years and it needs to be replaced or renewed, you can then claim these expenses as maintenance costs.
You always have the option to discuss with your tax office beforehand or when submitting your tax return whether the replacement of the old window can be partially classified as maintenance costs. There is certainly a fine line between maintenance costs and subsequent production costs.
For example, if your invoice clearly shows which expenses are for the window and which are for the door, this idea could be convincingly presented. An open communication with your tax assessor is certainly possible.
I hope my explanations have been helpful to you and remain
Yours sincerely,
André Hintz
Tax consultant
