Rent out debt-free condominium - buy house
December 13, 2011 | 20,00 EUR | answered by Oliver Burchardt
Dear Sir or Madam,
I am planning to buy a house at the beginning of the year and rent out my current debt-free owner-occupied apartment. The house is expected to cost 210,000 euros including utility costs. I will need to take out a loan of 150,000 euros for the house mortgage and use the rental income from the debt-free apartment towards repayment.
Here are some details:
Estimated annual gross salary: 41,000 euros
Deductible expenses: 4,000 euros per year
Debt-free owner-occupied apartment + garage:
Year of construction: 1983
Purchase price in 2000: 85,000 euros + 5,000 euros utility costs
Monthly utility costs: 290 euros
Property management: 35 euros per month
Garden maintenance / stairwell cleaning: 40 euros per month
Property tax: 45 euros per month
Expected cold rent: 450 euros per month
There are no maintenance or renovation costs that would be tax-deductible for the apartment.
My questions:
1. Approximately how much net income will I have from 5,400 euros rental income without house utility costs or 8,880 euros with utility costs per year after deducting taxes?
2. Is there a better alternative?
Dear inquirer,
Thank you for your inquiry, which I am happy to answer as part of an initial consultation.
Please note that the tax assessment is based on the information provided. Adding, changing, or omitting information may alter the result, possibly significantly.
In answering the question, I assume that you can pass on the ancillary costs to tenants in full (this may not be entirely correct, as there are likely non-apportionable items included; however, this should not be a problem for an estimation).
You must depreciate the condominium from the time of rental over a remaining useful life of 39 years at a depreciation rate of 2%. If the rental is made from 1.1.2012, the annual depreciation amounts to 1,800 EUR (90,000 x 2%).
The surplus from the rental (assuming no other deductible advertising costs) amounts to 3,600 EUR.
According to your information, your total taxable income then amounts to 40,600 EUR. This results in an income tax of 9,225 EUR, a solidarity surcharge of 507.37 EUR, and, if you are subject to church tax, a church tax of 830.25 EUR. The total tax burden is 10,562.62 EUR.
If you are married, the values are 5,564 EUR for income tax, 306.72 EUR for the solidarity surcharge, and 500.76 EUR for church tax. The total tax burden is 6,371.48 EUR.
Without renting out the apartment, the following taxes would apply:
Single
Income tax: 7,994 EUR
Solidarity surcharge: 436.92 EUR
Church tax: 714.96 EUR
Total: 9,145.88 EUR
So, from the additional income of 5,400 EUR, you would have 3,983.88 EUR left (5,400 EUR - difference in tax burden).
Married
Income tax: 4,602 EUR
Solidarity surcharge: 253.11 EUR
Church tax: 414.18 EUR
Total: 5,269.29 EUR
So, from the additional income of 5,400 EUR, you would have 4,297.81 EUR left (5,400 EUR - difference in tax burden).
I hope my explanations have been helpful to you.
Best regards,
Oliver Burchardt
Auditor
Tax advisor
