How can I optimize my taxes for a furnished rental property?
January 7, 2022 | 40,00 EUR | answered by Lucas Krebs
Dear Tax Advisor,
My name is Tatiana Klett and I have been operating furnished rentals for some time now. I rent out three apartments in different cities in Germany. So far, I have always reported the rental income correctly in my tax return, but I am wondering if there are ways to optimize my taxes on the rental income.
Currently, I am paying a high income tax on the rental income because I have not yet utilized any special tax benefits or depreciation options. Therefore, I am concerned that I am paying too much in taxes and that my profits are being diminished as a result.
I have heard about various tax options such as depreciation of acquisition and production costs or the applicable 2 percent rule, but I am unsure how to apply them specifically to my rental situation.
Can you please explain to me how I can optimize my taxes on furnished rentals? Are there specific depreciation options that I should use? How can I apply the 2 percent rule to my rental? Are there any other tax tips and tricks to reduce my tax burden?
I look forward to your professional advice and thank you in advance for your help.
Sincerely,
Tatiana Klett
Dear Mrs. Klett,
Thank you for your inquiry and your interest in optimizing your taxes in the context of your furnished rental. It is important that you consider how you can reduce your tax burden in order to maximize your profits. In fact, there are various tax options and depreciation opportunities that you can use as a landlord to optimize your taxes.
First and foremost, it is important that you record all relevant expenses related to your rental and claim them in your tax return. This includes, for example, the depreciation of acquisition and production costs for your furnished apartments. These can be depreciated over a certain period of time and thus reduce your taxable income.
The 2 percent rule you have heard of refers to the depreciation of buildings and can also be used for your rental. Here, you can claim 2 percent of the acquisition or production costs of the building as advertising costs annually. This can also have a positive impact on your tax burden and increase your profits.
Furthermore, you should also include all other advertising costs, such as maintenance and repair costs, administrative costs, insurance, or advertising costs for the rental, in your tax return. These expenses can also reduce your taxable income and thus reduce your tax burden.
It is advisable to discuss all relevant tax regulations and options with an experienced tax advisor to ensure that you are taking advantage of all tax benefits and optimizing your taxes. A tax advisor can give you individual tips and tricks on how to reduce your tax burden and maximize your profits.
I hope this information is helpful to you and I am happy to answer any further questions you may have. Thank you for your trust and professional advice.
Best regards,
Lucas Krebs
Tax Advisor
