Income from renting in Germany with a temporary residence abroad - a question of hobby?
May 3, 2013 | 25,00 EUR | answered by StB Patrick Färber
Good day!
Here is a tax-related question:
In 2011, my wife and I purchased a residential property and moved into it ourselves in the summer of 2011 after extensive renovation work (construction/maintenance expenses).
Since mid-2012, we have moved our household abroad for a period of -4- years due to work reasons. We have since rented out our property for a limited time.
The rental income generated from this is taxable in Germany. Can we offset the acquisition/construction/maintenance and advertising costs (partially) against this (resulting in negative rental income), or will the tax office accuse us of being a hobbyist because we plan to use our property ourselves again after returning to Germany?
Dear inquirer, I am happy to answer your question based on your dedication and within the scope of an initial consultation as follows:
With your rental income, you are indeed "limited tax liable" in Germany. This means, among other things, that you have to pay taxes on rental income from the first Euro onwards and cannot deduct the basic tax-free allowance of approximately 2x 8,000 EUR.
You usually do not have to worry about the issue of hobbyism if you rent to unrelated third parties and not to relatives. It is assumed that the rent is not below the local rental index. Therefore, the brief 4-year period is irrelevant in this case. You would only have problems with the tax office if you incur losses from the rental. This usually only happens if you deduct interest on external financing as operating expenses. It seems like this is not the case here.
Unfortunately, the acquisition and production costs themselves cannot be considered as operating expenses for rental income. You can only claim them through depreciation, in your case at 2% of the acquisition or production costs. With the extensive renovation costs immediately after purchase, you need to determine if they fall within the 15% threshold for acquisition-related production expenditure, thus increasing your depreciation basis as they are treated as production costs.
I hope I have satisfactorily clarified your questions for you!
Best regards,
Patrick Färber
Tax advisor
patrickfaerber@arcor.de
