Last Updated on February 20, 2024 by Kristina Valcheva
Own a German rental property or interested in investing in one? Do you want to know more about the property tax deductions available in Germany? Whether you’re a German resident or nonresident, it’s important to understand the various rental property expenses you may be able to deduct to reduce your tax liability.
According to the law, all rental income must be reported on your German income tax return, and in most cases, the associated expenses can be deducted. Thousands of German landlords pay more taxes on their rental revenue than they should every year.
Why? Because they do not take advantage of all of the allowable tax deductions in Germany available to landlords. Almost no other investment offers more tax advantages than rental real estate, aside from the possibility for consistent income and capital growth.
These benefits can often be the difference between losing money and making money on a rental property. In fact, you can exclude a wide range of expenses from your income to lower your tax burden. Remember to keep your business and personal transactions distinct, hence why we recommend registering a business bank account.
The top tax deductions for German residential rental property owners are listed below.
Financial costs
If you use outside capital for the property you rent out, these financing costs may be deductible (interest on debt and closing fees can also be considered). In a nutshell, interest is on money borrowed to buy or renovate the rental property. You can also claim bank fees associated with applying for finance.
Defects in the construction
If defects in the construction are repaired, you can deduct the expenses.
Costs for maintenance
Which expenses are considered maintenance? These could be for example door replacements, installation of electrical systems, etc.
Utility expenses
On your German tax return, you can also claim utility costs such as heating and hot water.
Real estate agent fees
You can also deduct the agent letting fees accumulated from renting out your property because they are considered income-related expenses. You can also consider rent collection fees.
House renovation costs
Renovation costs are tax-deductible because they are considered maintenance expenses.
Appraiser expenses
The costs of a surveyor (Gutachter) are deductible as acquisition expenses (Anschaffungskosten). A property valuation for the purpose of getting financing or a depreciation valuation of chattels can also be claimed.
Travel expenses that are business-related
Travel costs are among the most typical business expense deductions. Trips to the property (such as property inspections while a tenant is present), to the bank, and appointments with real estate brokers are all accounted for on your tax return. For this, a mileage logbook should be kept.
Land registry fees
The land registry costs can be deducted as well.
Janitorial Expenses
Janitor costs (cleaning and property management costs) / (Werbungskosten).
Interest on debt
Interest on debt for a rented house and real estate (for construction, purchase, expansion, conversion, and renovation) is deductible as financing costs in Germany.
Notary fees
Legal expenses incurred during the purchase of the real estate can be deducted from your tax return as acquisition expenditures (Anschaffungskosten).
Ground Rent
A leaseholder’s ground rent (Erbbauzins) is deductible as an income-related cost (Werbungskosten).
Demolition costs
If the owner intends to use the German property after the demolition, the demolition costs are deductible.
Advertising fees
The expenses of advertising for tenants are also tax-deductible in Germany.
Gardening and lawn mowing costs
Accounting fees
Fees for the continuous expenses of managing your rental accounts, completing tax returns, and seeking guidance.
Read also:
- Property tax in Germany – How much tax do I have to pay on my German rental income
Which rental expenses cannot be claimed on your German tax return?
- Personal contributions
The German tax authorities do not recognize personal contributions (Eigenleistungen), thus they cannot be claimed on your German tax return. These include:
- A property’s valuation for the purpose of purchasing it
- The cost of improving the property, including any renovations and repairs undertaken before the first tenant moved in
- The expense of restoring a dilapidated property to a rentable condition following the purchase
- Your mortgage’s principal repayments
- Any costs incurred in the search for a suitable house to buy
Who can help me file my German property tax return?
If you are looking for property tax advisors, you are on the right page. PTI Returns’ tax experts will help you file your German income tax return if you are a nonresident who earns income from a rental property. They will take care of all the paperwork, save you time and stress, and will claim all the applicable property expenses, so you don’t pay more tax than you should.
Who are we?
Property Tax International (PTI Returns) is a part of CluneTech (previously Taxback Group), which employs over 1,500 individuals in more than 20 countries. We have over 25 years of international tax experience, and our tax professionals will keep you tax-compliant in Germany.
If you have any additional questions, please contact our tax specialists at +353 1 635 3722 for a free callback.