What is included in income from renting and leasing?
What is included in income from renting and leasing (Form V) is regulated by the Income Tax Act. Section 21 of the Income Tax Act lists the following types of income:
- Income from renting and leasing of immovable property (land, buildings, parts of buildings, ships registered in a shipping register)
- Income from renting and leasing of rights equivalent to land (e.g. hereditary building rights, mineral extraction rights)
- Income from renting and leasing of business assets, particularly movable business assets (e.g. business inventory for commercial enterprises, agricultural businesses or freelance practices)
- Income from the temporary transfer of rights, particularly literary, artistic and commercial copyrights
- Income from the sale of rental and lease payment claims
Not included as rental income are revenues from renting out individual movable assets. This applies, for example, to the rental of individual pieces of furniture, the chartering of boats not registered in a shipping register, or the temporary lending of private vehicles, for example for a holiday trip.
(2022): What is included in income from renting and leasing?
Do I have to declare rental income from AirBnB and similar platforms?
If you rent out individual rooms in your owner-occupied or rented flat, you generally earn income from renting and leasing, which must be declared in the tax return.
Income from rentals via online platforms is taxable
- if the rental income exceeds the allowance of 520 Euro.
- if the total income is higher than the basic allowance.
- if the subletting is conducted on a commercial basis.
Allowance of 520 Euro per year
For simplification, you may leave rental income of less than 520 Euro per assessment period untaxed (R 21.2 para. 1 EStR). However, the amount of 520 Euro is not a tax-free amount but an allowance, i.e. if your rental income exceeds this amount by just one Euro, you must declare and tax the entire income in the tax return.
If income from subletting is concealed or no tax return is submitted, this is considered tax evasion. Tax offences can be prosecuted retroactively for up to 10 years.
Attention: The Hamburg tax authority currently points out that rental portals must provide the tax authorities with data on landlords.
Basic tax allowance
If the total income from all sources is below the basic allowance, no taxes need to be paid. 2022 the basic allowance is 9.744 Euro for single persons and 19.488 Euro for married couples.
Commercial rental
Income from renting and leasing is subject to business tax if, in addition to pure rental, unusual special services are provided. These unusual special services include, among others, staff, a breakfast offer or daily room service. Room cleaning or the provision of bed linen and towels are not considered special services. In this case, you would have to declare the income from your rental activity in Annex G.
If income from subletting is concealed or no tax return is submitted, this is considered tax evasion. Tax offences can be prosecuted retroactively for up to 10 years.
(2022): Do I have to declare rental income from AirBnB and similar platforms?
Which expenses can I claim as income-related expenses?
Rental expenses for subletting include, among others:
- Rent
- Additional costs such as heating, water, property tax
- Renovation and maintenance costs
All expenses must be apportioned based on the square metre area of the sublet rooms if they cannot be directly attributed to the subletting.
Example: If the flat is 100 sqm and the sublet room is 20 sqm, then 20% of the rental expenses and additional costs may also be claimed as income-related expenses.
Expenses that are directly attributable to the subletting include, for example, fees for online platforms such as Airbnb, 9flats or wimdu, purchase costs for furniture or craftsmen's services if these were incurred solely due to the subletting. All expenses should generally be proven by receipts. If a domestic help is employed for cleaning the rented rooms, payments must also be made cashlessly (by bank transfer) to be recognised for tax purposes.
Note: The Hamburg tax authority currently points out that rental portals must provide the tax authorities with data on landlords.
(2022): Which expenses can I claim as income-related expenses?
How are communal areas treated?
Communal areas (e.g. corridor, bathroom) in a sublet flat that can be used by overnight guests must not be included in the calculation solely based on the proportion of living space.
The share of these areas must also be divided among the number of residents in the household.
Example: The communal areas in a 100 sqm flat occupy a total of 30 sqm, and in addition to the landlady, her daughter and the subtenant live in the flat. In this case, 10% (30 sqm / 100 sqm / 3 people) of the expenses for communal areas may be claimed.
(2022): How are communal areas treated?
What do I need to know about rental income?
As a landlord, you must declare the basic rent and the service charges passed on to tenants as additional income. The costs incurred in this context can be deducted as income-related expenses.
Example of rental income:
- Rental income for flats or rooms
- Rental income for garages/parking spaces
- Service charges passed on to the tenant
- Rent for advertising spaces and vending machine sites
- Interest on credit balances from building society contracts
- Compensation payment from a tenant for early termination of the lease
- Leases for undeveloped land
- Income from a hereditary building right
If your annual rental income is below the 520 Euro threshold (e.g. for subletting), you can omit this information from your tax return. Income up to this threshold from temporary letting is exempt from income tax. This also applies to the temporary subletting of parts of your rented flat. In this case, no corresponding income-related expenses can be claimed.
Please do not enter your income from subletting under the sub-item „Income - rental income", but on the page "Subletting of rented rooms".
(2022): What do I need to know about rental income?
What do I need to know about renting out a holiday flat?
If you wish to claim your holiday home for tax purposes, you may need to overcome significant hurdles, as the tax authorities will only contribute if the primary focus of the property is on rental. You must demonstrate a profit-making intention to the tax office. Expenses and losses for a holiday property can only be deducted if the primary aim is to generate profit through rental. However, this is where the main issue lies. If you cannot convincingly demonstrate to the tax office that you intend to make money from the holiday home, they will consider it a "hobby", and there will be no tax savings. The simplest way to prove the intention to make a profit is to initially not use the holiday home yourself. You can demonstrate this to the tax office with, for example, an estate agent contract that excludes personal use for the entire year. In addition, the profit-making intention through rental must be demonstrated to the tax office:
According to a decision by the Federal Fiscal Court (Ref: IX R 57/02), the property should be rented for at least 75 per cent of the local average rental period. If such a rental period cannot be achieved, a profit forecast over a 30-year period must show that a rental surplus can be achieved during this time (BFH: Ref IX R 97/00). This profit forecast must also be submitted if the holiday property is to be used privately. If the forecast concludes that a surplus is not expected within the 30-year period, the advertising costs will not be recognised. In this case, however, the rental income does not have to be taxed either. If the profit forecast is positive, the tax office must recognise the costs. The deductible rental periods are then compared with the non-deductible periods of personal use. The longer the rental period, the more can be deducted. Any potential vacancy can also be included in the rental period, for example, if it was precisely determined in advance when the holiday home would be used personally. Otherwise, the vacancy will be divided according to the ratio of rental to personal use.
Tip: What does "local average rental period" actually mean? What figures are relevant? The Federal Fiscal Court has recently addressed this question and issued a ruling that may help affected holiday home owners. When determining the benchmark for occupancy rates, only the local average rental period for holiday homes should be considered, not for all accommodation establishments in a town. Therefore, the benchmark is significantly lower than assumed by the tax authorities (BFH ruling of 26.5.2020, IX R 33/19).
If the tax office recognises all points, acquisition and financing costs as well as heating, electricity or repairs can be deducted for tax purposes. Especially in the first few years, for example due to loan interest, expenses may exceed income, which can reduce taxable income.
Current: The Federal Fiscal Court has commented on how to proceed if a landlord owns a holiday home with several flats that are used differently over the years, for example, initially for long-term rental and later as holiday flats. Is the profit-making intention to be assessed separately for each flat or for the entire property?
The Federal Fiscal Court has ruled that it depends on each individual flat. It also decided that the question of whether a total surplus can be achieved must be reassessed in the event of a change of use. This is the case, for example, if a flat is initially rented out long-term, then renovated and subsequently used as a holiday flat (BFH ruling of 8.1.2019, IX R 37/17).
(2022): What do I need to know about renting out a holiday flat?
