The taxation of real estate in Germany can sometimes be complex. In this article, we give you some keys to better understanding and anticipating it.
1. Resale
In Germany, capital gains on your principal residence are tax-free (as in France). For rental investment in Germany, you need to wait 10 years so that this capital gain is no longer taxable. That said, it's much more advantageous that France where you have to wait until 30 years !
There's a trick to reselling a rented apartment without paying taxes before the 10-year deadline: you need to have inhabited yourself the year of sale + the two years previous years. The rule is based on the calendar year.
Example: you bought an apartment in 2020 and rented it out. You move in in December 2022. You can resell it in January 2025 without paying capital gains tax.
In short, if you're buying a rental property and don't intend to move in, it's best towait the 10-year deadline... Not only for tax reasons, but also for mortgage issues (see our article on the 10-year deadline). mortgage loan).
2. Rents
If you rent, the rents are taxable. But you can deduct a good number of expenses (This list is not exhaustive) :
- Visit loan interest are deductible. Leverage is also an essential tool for boosting wealth. Read our article on leverage. Please note: only interest is deductible, not interest expenses. capital repayment. Interest decreases as the loan is repaid.
- Maintenance work are entirely deductible the year in which they are incurred. Please note that construction / extension or any type of work that significantly increases the value of the property. are not deductible entirely. They are amortized over a period of time and are therefore less attractive. The dividing line between maintenance and construction is fine ! Another thing to consider: the total cost of maintenance work must not exceed 15% of property value in the 3 first years ! Example: your work costs €20,000 and you exceed the 15% limit. Instead of deducting €20,000 all at once, and thus recovering up to €9,000 when you file your annual tax return, you would, for example, deduct the €20,000 over 10 years, recovering €900 per year for 10 years.
- Totally unique of its kind: you can deduct a lump sum that you don't even have to pay out: amortization, 2% per year on the value of the building. (In some cases even more!)
- Management fees, insurance etc...
All these deductions can lead to a fiscal deficit even without financial deficit. Warning: For the principal residence, there is generally no deduction possible.
3. The rates
The same as your earned income, so it's very high. If your taxable income is higher 75,000€ / year, your marginal rate is 47 %. Is this bad news? NO, because if you're running a deficit, it's the Finanzamt which owes you 47% of the amount of the deficit.
