Rededication of loan purpose
April 25, 2013 | 80,00 EUR | answered by Michael Herrmann
Dear Sir or Madam,
I currently have a loan of EUR 100,000 on a property that I use as my primary residence. If I were to repay the loan early with my own funds, the bank would calculate a significant prepayment penalty.
I would like to keep the current property as my primary residence and purchase a new property for over EUR 100,000 to rent out. I would like to reassign the existing mortgage to the new property in order to make the interest costs tax deductible.
Is it possible to reassign the current loan in such a way that the interest on the new mortgage can be tax deductible in future income tax returns?
Thank you.
Dear questioner,
First of all, thank you for your inquiry, which I would like to answer based on the information provided and in the context of your commitment in an initial consultation. The response is based on the description of the situation. Missing or incorrect information about the actual circumstances can affect the legal outcome.
Interest on debts is deductible as advertising costs in the context of rental. Advertising costs are costs that serve the acquisition, securing, and maintenance of income.
You cannot establish this connection in the model described, as the loan was taken out for the acquisition of the existing property. An economic reclassification is not possible, as tax law here refers to the original acquisition process.
The tax deduction of interest expenses is only possible in connection with taking out a new loan for the new property. It is irrelevant whether the money is actually needed.
From a tax perspective, only the case of taking on new capital for a new object is relevant. An economic evaluation is made in this regard. Therefore, refinancing or different collateral are irrelevant.
I hope that these explanations have given you a sufficient overview of the situation within the scope of your commitment and this initial consultation, and remain
Yours sincerely
Michael Herrmann
Diploma in Financial Management (FH)
Tax consultant
