Rental: Travel to rental property usually fully deductible
Landlords must regularly travel to their rental properties, whether for inspections, repairs, viewings, or other reasons. According to Section 9 (3) of the Income Tax Act, similar rules apply to these journeys in connection with rental income as for employees commuting to work.
Landlords can usually claim the business travel allowance of 0.30 Euro per kilometre travelled as business expenses. The Federal Fiscal Court has ruled that landlords can generally use this regulation.
The exception is if the rental property is considered the landlord's regular place of work. In this case, the commuting allowance of 0.30 Euro per kilometre applies. A landlord has a regular place of work at the rental property if they visit it not only occasionally but with a certain regularity and frequency. An example is a landlord who visits their construction sites almost daily.
The Cologne Fiscal Court has also made a decision on this matter. A landlord's place of work is where they perform at least one-third of their activities. Travel costs between different rental properties are not considered journeys to the first place of work but as journeys between two first places of work.
If you partially construct a building yourself and travel to the construction site, the travel costs are part of the building's construction costs and cannot be settled with the commuting allowance. Instead, the business travel allowance of 30 cents per kilometre travelled or the actual costs apply (BFH ruling of 10.5.1995, IX R 73/91).
Rental: Travel to rental property usually fully deductible
What are income-related expenses in connection with the rental and leasing of a property?
You can deduct expenses incurred in generating income from renting and leasing. These expenses are costs incurred for the acquisition, security, and maintenance of the property. The expenses are deducted from the rental income. A positive result, i.e., a profit, increases your tax burden. A negative result leads to a tax saving.
A tax loss from renting and leasing, caused by high expenses, can be offset against other positive income. The decisive factor for entering the expenses in the tax return is the date of payment. When the expenses were incurred or when you received the invoice is generally irrelevant.
You can also claim expenses if the property is not yet rented. However, there must be an intention to rent. If you do this, the tax office will initially recognise the costs but will issue the tax assessment on a provisional basis. If you do not rent out the property, the tax office may revoke the deduction of expenses.
What are income-related expenses in connection with the rental and leasing of a property?
Which costs can I deduct as income-related expenses?
If you rent out a property, you can deduct all expenses related to the property as income-related expenses. These include, among others:
- Property tax
- Loan interest
- Depreciation
- Insurance premiums
- Costs for electricity, water and heating, sewage, waste disposal, etc.
- Expenses for caretakers and property management
- Cosmetic repairs
- Costs for furniture in furnished rentals
- Travel expenses to the property
You can also declare service charges billed to the tenant as income-related expenses if they are included as income in the tax return.
Which costs can I deduct as income-related expenses?
Can a home office be deducted for rental activities?
Expenses for a home office and its furnishings are only fully deductible as business expenses if the home office is the central location for all professional activities. Alternatively, an annual allowance of 1,260 Euro can be claimed. This is at the taxpayer's discretion. If the conditions for the deduction are not met in a given month, the annual allowance is reduced accordingly. However, there must be an actual home office with its own four walls.
In some cases, such as a landlord managing properties, the home office can be deducted as business expenses against rental income, or the allowance can be used.
If no other permanent workplace is available for professional activities, home office costs can be deducted with a daily allowance of 6 Euro per day, up to a maximum of 1,260 Euro per year. A separate home office is not required; even a work corner or the kitchen table is sufficient. The daily allowance can only be claimed once per calendar day for all professional activities in the home.
Example: A bus driver (Z) is also a freelance writer and involved in property rental. As Z has no other permanent workplace for these activities, he can deduct a daily allowance of 6 Euro for each day he carries out these activities from home, up to a maximum of 1,260 Euro per year. Even if Z works as a bus driver on the same day, the deduction of the daily allowance for the other activities is not affected. Z can allocate the allowance either proportionally to freelance income or rental income, or fully to one of these types of income.
Important: You must prove that no other permanent workplace is available to you for the respective professional or business activity. A corresponding certificate from the employer can be helpful evidence.
Can a home office be deducted for rental activities?
