Renting and Leasing: An Overview of Deductible Costs
How will rental income will be taxed?
It’s not always crystal clear which costs landlord’s can deduct on their tax return – in fact, this area of tax law is quite extensive, which is why we’d like to provide an overview of the most important information and deductible expenses that can help reduce your tax burden. From inspection trips to energy performance certificates and personal contributions – we’ll explain it all here!
- Demolition costs are deductible if the owner wishes to use the property themself following the demolition.
- If construction defects are repaired, the costs are tax deductible.
Travel costs for visits and appointments
- Journeys made to visit the property, to hardware stores, to the bank, or to appointments with real estate agents are taken into account on your tax return.
- Personal contributions (Eigenleistungen) are not recognized by the German tax offices and cannot be claimed on your tax return.
- Ground rent (Erbbauzins) paid by a leaseholder is tax-deductible as an income-related expense (Werbungskosten).
- Maintenance expenses can include door and window replacements, electrical installations, etc. These are tax deductible.
- Financing costs are recognized if outside capital is used for the leased property (closing fees and interest on debt can also be recognized).
Land registry fees
- Fees charged by the land registry can be deducted.
- Surveyor (Gutachter) costs are deductible as acquisition costs (Anschaffungskosten).
- Janitorial and property management expenses can be deducted as income-related expenses (Werbungskosten).
Real estate agent fees
- Broker fees accumulated from renting our your property are recognized as deductible income-related expenses or financing costs.
- Utility expenses such as heating, hot water, sewage, etc., can be claimed on your tax return.
- Purchase contract notarization costs can be claimed as acquisition costs (Anschaffungskosten) on your tax return.
- Renovation costs are considered maintenance expenses and are tax-deductible.
Interest on debt
- Interest on debt for a loan that was used for the rented house and real estate (for construction, purchase, expansion, conversion, renovation) is deductible as financing expenses.