Splitting a single-family home into a rental apartment and a self-occupied unit.
February 7, 2010 | 40,00 EUR | answered by Dipl.BW/SB Ulrich Stiller
I will soon take over the house that was built together with my ex-partner (unmarried). To do this, I will take over the existing loan amounting to approximately 1/4 of the property value. Additionally, I will take out another loan amounting to 1/3 of the property value in order to pay out my partner. Since the house is too big for just me, I plan to rent out one floor. This will incur renovation costs (for the structural separation/separate entrance) of approximately 15,000 euros.
My main question now is:
What do I need to consider in order to reduce my (future) tax burden on rental income? Is it advisable or necessary to divide the new loan into a portion for the property acquisition from my ex-partner and a portion for the renovation costs, or can this be done at the time of the first rental?
(I do not receive a homeowners' allowance, but my ex-partner does)
Thank you for your response!
Dear inquirer,
Thank you for your inquiry, which I would like to answer based on your information and in the context of your commitment in a preliminary consultation as follows:
Deducting advertising costs for the rented portion requires that such expenses can also be attributed to the rented portion. The assumption of the loan from your ex-partner constitutes acquisition costs. The new loan you have taken out for the payout also represents acquisition costs, namely 1/4 of the amount. The remaining loan amount is likely to be used for renovation.
In the purchase contract, you MUST allocate the costs to the self-used and intended rented apartment. This is usually done based on the ratio of the self-used to the rented living space of the property. Once the acquisition costs are determined, the assumption of the loan and the taking out of the new loan must be allocated separately to the rented portion. It should also be noted how high the renovation costs are. More details can be found in the BMF letter of 16.04.2004 (IV C 3 - S 2211 - 36/04, BStBl. 2004 I p. 464).
You will need to involve a tax advisor in drafting the contracts to avoid any mistakes. This forum cannot replace the involvement of a tax advisor.
I hope I was able to assist you in your commitment.
Kind regards
Ulrich Stiller
Tax advisor
