What options are available to avoid tax pitfalls when renting out real estate?
January 5, 2024 | 50,00 EUR | answered by Lorenzo Hartmann
Dear tax advisor,
I recently inherited a property and am now considering renting it out. However, since I have no experience in this area, I am concerned about potential tax pitfalls that I definitely want to avoid.
Currently, I have not yet rented out the property and am unsure about the best approach to take in terms of taxes. I wonder if there are certain measures I should take to avoid tax problems. I have heard that there are various tax aspects to consider, such as the tax treatment of rental income, depreciation, or advertising costs.
I would like to know what specific options are available to avoid tax pitfalls when renting out properties. Are there any specific tax benefits that I can take advantage of? What documents and records do I need to prepare for tax processing? Are there any specific deadlines that I need to meet?
I would greatly appreciate it if you could provide me with specific tips and advice to help me better navigate this matter. Thank you in advance for your support.
Sincerely,
Leonie Fritsche
Dear Ms. Fritsche,
Thank you for your inquiry and your trust in my expertise as a tax advisor for rental and leasing. I understand that as a newcomer in this field, you are concerned about potential tax pitfalls. I would be happy to help you avoid these and provide you with specific tips on how to proceed tax-wise.
First and foremost, it is important to know that income from rental and leasing is generally considered as income from non-self-employment and must be reported in your tax return. Rental income, depreciations, and advertising costs are relevant tax aspects that you should consider.
To avoid tax problems, I recommend that you carefully keep all relevant documents and records. These include, for example, rental agreements, receipts for expenses incurred (e.g. for renovations, repairs, insurance), as well as all relevant correspondence with tenants. These documents serve as proof for your tax processing and should be well structured and organized.
In terms of tax benefits, there are several ways in which you can benefit. For example, you can claim advertising costs to reduce your tax burden. This includes costs for the maintenance and administration of the property, interest on loans, or depreciation on the value of the property.
It is also important to adhere to certain deadlines to avoid tax problems. You must report your income from rental and leasing in your annual tax return and submit it to the tax office on time. Also, submitting sales tax pre-registration may be relevant if you are liable for sales tax.
In summary, I recommend that you familiarize yourself early on with the tax aspects of renting out your property and seek support from a tax advisor if necessary. This can help you avoid tax pitfalls and make your tax processing efficient and correct.
I hope that my tips and advice are helpful to you and I am available to assist you with any further questions. Please do not hesitate to contact me if you need further support.
Best regards,
Lorenzo Hartmann
