How does the tax treatment of rental income work?
November 13, 2022 | 40,00 EUR | answered by Wolfgang Stricker
Dear tax advisor,
My name is Alwin Neumann and I am the landlord of an apartment from which I earn rental income. So far, I have simply received this income into my account without delving into the tax treatment. Now I am worried whether I may have to pay additional taxes or if there are certain tax-free allowances or deductions that I can claim.
Currently, I do not know how rental income is treated for tax purposes and what information I need to include in my tax return. I am afraid that I may have made mistakes in the taxation process and now fear the consequences. Therefore, I would like to gather more information and learn about possible solutions to optimize my tax situation.
Could you please explain to me how rental income is treated for tax purposes and what options exist to save taxes or pay them correctly? Are there specific tax-free allowances or expenses that I can claim? How can I ensure that I fill out my tax return correctly and take advantage of potential tax benefits?
I thank you in advance for your help and look forward to your professional advice.
Sincerely,
Alwin Neumann
Dear Mr. Neumann,
Thank you for your inquiry and your trust in my tax advice. As a landlord earning rental income, it is important to understand the tax treatment of these earnings in order to take advantage of potential tax benefits and avoid any mistakes.
In general, rental income is subject to income tax and must be reported in your annual tax return. The rental income is considered as income from renting and leasing. Tax-relevant expenses include interest on loans used to finance the property, maintenance costs, management fees, property tax, building insurance, and depreciation for the property. These expenses can be claimed as deductible expenses and subtracted from the rental income to reduce your tax burden.
Regarding exemptions: Landlords can deduct a flat rate of 30% of rental income as flat-rate deductible expenses. Additionally, you can benefit from the so-called small business owner regulation if your rental income falls below the exemption limit of 22,000 euros per year. In this case, you are exempt from sales tax.
To ensure that you fill out your tax return correctly and take advantage of all possible tax benefits, I recommend seeking advice from a tax advisor specializing in rental income. A tax advisor can help you determine your tax situation, consider all relevant expenses, and provide you with tips on how to save taxes.
I hope this information is helpful and answers your questions. If you need further assistance or specific help optimizing your tax situation, I am happy to help.
Best regards,
Wolfgang Stricker
