Rental of furnishings
December 14, 2010 | 35,00 EUR | answered by Michael Herrmann
Hello,
I have recently started renting out a single-family house (significantly renovated and expanded in terms of use and size), so these are all construction costs. I write these off annually at 2%, assuming a useful life of 50 years. But what about relatively "mobile" furnishings such as bathroom fixtures and shower cabins or even a fitted kitchen that is rented out. A shorter lifespan can be expected here! Is it possible to write these off more quickly (and where is this regulated), or do they also unconditionally count towards the total construction costs?
Thank you in advance for your response!
Dear inquirer,
First of all, thank you very much for your inquiry, which I would like to answer based on the information you provided and in the context of your use within an initial consultation. The response is based on the description of the facts. Missing or incorrect information about the actual circumstances can affect the legal outcome.
Maintenance expenses generally occur when the asset is maintained in proper condition or when the old condition is to be restored. This includes repairs, even if better material or a more modern equipment is chosen. Any resulting increase in value, e.g. in buildings, is not crucial for determining whether it is maintenance or construction expenses. Examples of maintenance expenses include roof repairs, repairs to sanitary facilities or electrical systems, or replacing a fence with a boundary.
Construction expenses are assumed when something new has been created after completion or when the nature of an asset has been changed significantly, especially through expansion or substantial improvement. A significant improvement occurs when there is a substantial improvement in usability due to construction measures in line with operational objectives. Examples of construction expenses include combining two apartments, installing a heating system instead of individual stoves, installing elevators for the first time, etc.
If maintenance and construction expenses occur simultaneously, a separation should be made in principle, if the maintenance expense would have been necessary even without the construction expense. If the maintenance expense is caused by the construction expense, then only construction expenses subject to activation are to be considered overall (e.g. painting the rooms after an extension).
Your statement that all expenses are construction costs due to a comprehensive renovation should be reconsidered. Especially in the case of sanitary facilities, maintenance expenses are applicable if there has not been a complete relocation. Each measure should be assessed separately.
However, the expenses for sanitary facilities should be included in the building depreciation when classified as construction costs, as they are at least so closely connected to the building that they cannot be removed without damage and are not usually removed. They are therefore attributable to the building components. The same applies to windows and similar installations.
The fitted kitchen is not a building component as it is not connected to the building. It is never attributed to construction costs. I recommend a depreciation period of 10 years.
I hope that with this information, I have provided you with sufficient insight into the matter within the scope of your use and this initial consultation, and remain
Yours sincerely,
Michael Herrmann
Dipl.-Finanzwirt (FH)
Tax advisor
