What are the effects of renting out real estate on my income tax return?
May 24, 2024 | 40,00 EUR | answered by Johann Lauer
Dear tax consultant,
My name is Max Wolf and I operate the rental of two properties as a side business. In the past, I did not declare the income from the rental in my income tax return because I was unsure how this would affect my tax liability.
I am currently delving deeper into the topic and thinking about the tax consequences that come with renting out my properties. I want to ensure that I fulfill my tax obligations correctly and do not evade taxes.
My concern is that I may have to pay back taxes because I did not declare the rental income in the past. Additionally, I am wondering if as a landlord, I can also take advantage of tax benefits to reduce my tax burden.
Therefore, I would like to ask for your expert opinion: What are the effects of renting out properties on my income tax return? Are there any specific regulations or deductions that I can take advantage of as a landlord? How can I fulfill my tax obligations correctly and utilize potential tax benefits?
Thank you in advance for your assistance.
Sincerely,
Max Wolf
Dear Mr. Wolf,
Thank you for your inquiry regarding the tax implications of renting out your properties. It is good that you are taking a closer look at the topic and want to ensure that you fulfill your tax obligations correctly.
First and foremost, I want to emphasize that as a landlord, you do indeed have tax obligations and must report your rental income in your income tax return. Rental income is subject to income tax and must be taxed accordingly. If you have not reported your rental income in the past, this could indeed lead to back payments.
However, it is important to know that there are also tax benefits available to landlords that can help reduce your tax burden. Possible deductions include expenses related to renting out your properties, such as costs for repairs, renovations, management fees, property tax, insurance, loan interest, and more. These expenses can be deducted from rental income to reduce taxable income.
Furthermore, there is also the option to claim depreciation for the properties in the form of depreciation allowances. This allows for the depreciation of the properties over their useful life to be considered for tax purposes and deducted as expenses.
To fulfill your tax obligations correctly and take advantage of potential tax benefits, I strongly recommend consulting a tax advisor or tax expert. A tax advisor can help you properly fill out your income tax return, consider all relevant tax aspects, and optimize potential tax benefits.
I hope that my response helps you and I am available if you have any further questions. Thank you for your trust and inquiry.
Sincerely,
Johann Lauer, Tax Advisor
