Field help:
Is the property rented out in whole or in part to relatives for residential purposes?
Specify whether the property was rented to relatives in whole or in part.
Who is considered to be a relative?
According to sect. 15 of the Fiscal Code (AO), the following persons are considered relatives:
- Spouses or life partners
- Direct relatives by birth or marriage, for example, parents, grandparents, children and grandchildren
- Siblings
- Nieces and nephews
- Spouses or life partners of the siblings
- Sisters-in-law and brothers-in-law
- Uncles and aunts
- Fiancée
- Persons with a special close relationship, for example, long-term life partners with personal and economic ties
Tax audit in the case of rental to relatives
The tax office checks rentals to relatives particularly to ensure that the rental conditions are not unreasonable. The following rules apply:
- Rent at least 66% of the local market rent:
The rental is considered to be on a full-pay basis. Income-related expenses can be deducted in full.
- Rent below 66% but above 50% of the market rent:
The rental is considered a reduced-rate lease. A share of the income-related expenses is deductible. In addition, a total profit forecast is required.
Positive result: Full deduction of income-related expenses.
Negative result: Only a proportion of income-related expenses deductible.
- Rent below 50% of the market rent:
The rental is divided into a paid and a free part. Income-related expenses are only deductible for the paid part.
Example: The usual local rent is 1.000 Euro:
- If you rent a property for 700 Euro (70%), you can deduct the full amount of the income-related expenses.
- If the rent is 500 Euro (50%), the income-related expenses are taken into account proportionately.
- If the rent is less than 500 Euro, the income-related expenses are only deductible for the paid part.
