Uncovering tax-free dwelling: methods to keep your wallet loaded!

Purchasing a property in Germany comes with its fair share of taxes and deductions, making it essential to understand the intricacies of the system. Here's a breakdown of some key points to consider when buying a property, whether for personal use or investment.

Separating Items in Purchase Contract

When buying an existing property, listing items such as lamps, awnings, fireplaces, and the built-in kitchen separately in the purchase contract can help save on real estate transfer tax.

Riester Subsidy for Real Estate

The Riester subsidy for real estate assumes that you live in the property yourself and keep it. If you sell your house and do not buy a new property for self-use within 5 years, subsidies will be recovered, and taxes will be demanded.

Advertising Costs for Rental Properties

If you acquire an immovable property near the end of the year, which you intend to rent out, you can already claim advertising costs for this, even before any rental income has been generated.

Contract for Free Plot of Land

When buying a free plot of land, a contract with the seller is necessary for calculating the land transfer tax. No land transfer tax is due on costs related to the construction of the house when buying a free plot of land.

Deducting Moving Costs

Moving costs can be deducted for tax purposes if the move is within a small municipality and classified as "home-related services". Only 20% of the labor costs can be deducted. However, the best way to deduct moving costs from taxes is to declare the move as work-related, allowing you to set off the moving costs as advertising costs and deduct 100%. For the tax office to recognize moving costs as work-related, at least one of the following points must be met: starting a first job, job change or reassignment significantly increases commute, shorter commute, moving into or out of a company or second home, returning from abroad to take up a new position in Germany.

Tax Software for Landlords

There is specialized tax software for landlords available for income tax declaration and regular tax returns.

Deductions for Rental Properties

Tax reductions for property acquisition for rental purposes are generally possible through deductions such as depreciation (wear and tear allowance), deducting mortgage interest, operational costs, maintenance expenses, and allowances for renovations. Specific conditions apply depending on the property’s use and law.

Deductible Expenses for Rental Properties

When buying a house for rent, property taxes, purchase-related costs, renovation and maintenance costs, ongoing ancillary costs, vacancy costs, notary fees, real estate agent fees, real estate transfer tax, and entries in the land register can be claimed for tax purposes. Incurred costs such as vehicle registration, registration fees, and school change-related costs (like tutoring) can also be deducted for tax purposes.

Buying House Separately

The greatest saving when buying a private house can be achieved if the house and land are purchased separately.

Tax Return for Rental Properties

For the tax return for the purchase of a house when renting, the "Annex V" is relevant, where corresponding income and expenses are entered.

Private Use Property Deductions

When buying a house for private use, only household services such as craftsmen's invoices can be claimed for tax purposes.

Consulting a Tax Advisor

If there are any uncertainties, it is best to consult a tax advisor.

City-Specific Considerations

In large cities like Berlin, Munich, or Hamburg, a move within the city can be considered work-related if you no longer have to cross the city centre during rush hour.

Riester Pension

The Riester pension behaves like a classic Riester contract in terms of tax, and what you pay into the residential Riester can be claimed for tax purposes.

Uncovering tax-free dwelling: methods to keep your wallet loaded!