Taxing rental income

Why are rental incomes taxed?

Rental income from renting and leasing houses and apartments counts as income under § 21 of the German Income Tax Act (EStG) and is therefore subject to income tax. It does not matter whether your income comes from renting condominiums, single-family homes, granny flats, or holiday apartments. Special rules apply to the taxation of rental income when renting to family members, entrepreneurs, or vacant properties.

Allowances for taxing rental income

The Income Tax Act (EStG) provides citizens with a basic allowance. The basic allowance for 2018 is 9,000 euros for singles and 18,000 euros for married couples. All income from renting and leasing up to this allowance is tax-free. Taxes are only due when total income from all sources (including child allowance) exceeds the basic allowance.

Which expenses are tax-deductible

If you have to pay tax on your rental income, there are certain expenses you can deduct. For example: broker fees, interest on loans for property financing, property tax, repairs, renovation costs, and tax advisory fees.

When is the tax due?

Rental income must be taxed in the year it is earned, i.e., in the year the rental income is received. The duration of the lease does not matter. If you receive rent by check or cash, the date of receipt applies. For bank transfers, the date of credit to your account is relevant. Regular rent or lease payments received between December 22 and January 10, which are due the following year, must be taxed in the year to which they economically belong.

How are taxes on rental income reported in the tax return?

Rental income is listed in Appendix V of your tax return and is calculated separately.