We’ve answered all of your German rental income tax questions!
Want to know about taxes on income from property in Germany? The German tax system can be tricky – especially if you are not a resident of Germany or you don’t speak the language.
But don’t worry, the PTI team is here to help!
Every day our team encounters countless questions regarding taxes on income from property in Germany.
We have used some of those questions to create this handy guide on everything you need to know about paying tax on rental income in Germany.
- In this article:
- What is rental property income tax?
- I have rental earnings from my German property, what are my tax obligations?
- How can I determine my tax residency status in Germany?
- How does the process work?
- What do I need to file a German income tax return?
- How is rental revenue calculated in Germany?
- What are the tax rates in Germany and when is the deadline for filing a return?
- What are the German local taxes?
- Can property owners in Germany claim any tax allowances?
- Will I have to pay any additional taxes in Germany?
- I intend to sell my German property, what are my capital gains tax obligations?
- What happens if I don’t file my rental income tax return?
- Who can help me with my German Rental Income tax return?
What is rental property income tax?
This is a levy you must pay on any revenue that you earn from rent (for example from renting a house, an apartment, leasing immovable property, subletting a room in your own apartment etc.)
I have rental earnings from my German property, what are my tax obligations?
As a non-resident German property owner, you are obliged to file a non-resident German property tax return. Non-residents are subject to a personal levy on income derived from their German property.
PTI can help you to determine how much tax you pay on rental income, so you avoid overpaying.
How can I determine my tax residency status in Germany?
Owners of a rental property in Germany are subject to taxation regardless of whether or not they are a tax resident.
To be considered a resident in Germany, the individual’s primary residence must be located there or they must spend over 183 days in the country. This amount of time must be during a two year period.
How does the process work?
Advanced income tax payments may be required by the German tax office during the course of the taxation year (in March, June, September and December).
The German tax office (Finanzamt) then settles both the previous year’s income levy and the advance payments for the current year. The advance payments are generally based on the previous year’s tax liability.
What do I need to file a German income tax return?
In order to file your German income tax return you will need:
- Your tax ID / tax number (if you don’t have one it will be assigned automatically after you’ve first filed)
- Details of your local tax office
- The IBAN of your German bank account
- Your annual rental statement
- Expense receipts regarding the property
How is rental revenue calculated in Germany?
Rental income is calculated by using a progressive scale method (from 15% to 42%) depending on the taxable base. The base is determined as the rental earnings is reduced by deducting allowable expenses and depreciation (such as building, fittings and furniture).
A solidarity surcharge at a rate of 5.5% of income tax has to be paid on top of this only with the tax due exceeding €972. It is advised that non-resident married couples file their returns separately.
What are the tax rates in Germany and when is the deadline for filing a return?
The German tax year runs from January to December. The income tax rate in Germany for non-residents is progressive ranging from 14% to 42%. If you earn income above €55,961 through the tax year, it will be taxed at 42%. Very high income levels of above €265,327 are taxed at 45%. You must file your German income tax return (Einkommensteuererklärung) by 31 July of the year after you earned the income. This deadline can be extended to 28 February next year, if an advisor is preparing your return on your behalf.
What are the German local taxes?
Local Property Tax is applied on real estate in Germany. It is a communal tax levied by the local authority in each region. Rates vary from location-to-location and are also based on the type of property.
Can property owners in Germany claim any tax allowances?
In Germany, everyone’s earnings are subject to a basic tax allowance. Up to this amount, your income is not subject to taxation.
The basic tax allowance in 2021 is €9,744 if you are not married or in a civil partnership, while for 2020 the basic taxable allowance was €9,408
For couples who are married or in a civil partnership it is €19,488. If your taxable income is higher than these amounts, you will pay income tax on it. Taxation rates vary from 14% to 42%.
In short, the higher your taxable income, the higher the rate of taxation will be.
The top rate of tax is 42%. This is only payable on earnings of more than €250,731 a year if you are unmarried. For couples who are married or in a civil partnership, the maximum taxable rate is only applicable for incomes of over €501,462.
Will I have to pay any additional taxes in Germany?
You are due to pay an additional solidarity surcharge of 5.5% on top of your income tax liability. If you are a registered Church member, you may also be liable to pay a church tax of 8 – 9% on your income tax liability.
I intend to sell my German property, what are my capital gains tax obligations?
If you make a gain when selling your German property, you are liable to pay German capital gains tax (CGT). The German capital gains tax rate is the same as the German personal income rate. Profits from the sale of private real estate that have been held for more than 10 years are exempt from German CGT.
How is rental income taxed in Germany?
German law requires every person to tax their income. Therefore, if you rent an apartment or a house, you will have to pay taxes on the rental income.
Once the rental income tax is calculated, a solidarity surcharge of 5.5% is added.
What happens if I don’t file my rental income tax return?
You must file your German income tax return by 31 July, the year after the income was received. An extension to 31 December applies where a tax advisor prepares the return on your behalf.
Failure to comply with the deadlines can result in fines and penalties.
Who can help me with my German Rental Income tax return?
The PTI team will guide you through the entire filing process.
Our team has provided many people with German property tax assistance.
In fact, last year, we filed over 322,000 tax returns.
Our goal is to minimize your tax liability and maximize your profit potential.
Your dedicated tax specialist will be your one point of contact throughout. They will prepare your tax return and communicate directly with the German Tax Agency when required.
Our team is specifically focused on tax compliance and on ensuring the property owner’s tax obligations are addressed.
File your German rental income tax return with PTI today. Get started here