Subletting: Navigating Taxes on Your Extra Space
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When your spare room or additional apartment goes vacant, turning it into a rental unit via platforms like Airbnb, Wimdu, or 9flats can seem like a smart move. However, staying on the right side of the tax authorities is crucial to avoid trouble. The Federal Association of Tax Aid Associations (BVL) emphasizes this point.
Taxable Income Thresholds
If you only occasionally rent out your living space and don't make over €520 per year, you can breathe easy. Your earnings fall under the threshold of simplified taxation and are not required in your tax return. However, it's always good practice to document these revenues for future reference.
On the other hand, if the rental income exceeds €520 per year, it's time to disclose your business in your tax return when the income minus expenses exceeds €410. This usually applies to permanent rentals.
The Intention to Generate Income
To be taxed, your rental activities should demonstrate an intention to generate income. In the case of permanent rentals, this is typically assumed, signifying that the rental income surpasses operating costs.
For example, if you're renting an entire apartment and charging guests more than your personal housing and utility expenses, you're likely generating a surplus.
Shared Costs
When you're renting out individual rooms, allocating shared costs gets a bit tricky. For instance, if the rented room comprises 20% of the total living space, only 20% of the total apartment costs may be used as a basis. If bathroom usage is shared, its share must also be divided per user.
Avoiding Tax Evasion Allegations
Neglecting to declare your rental income can lead to tax evasion accusations. The authorities may find out through platforms like Airbnb, especially if you conduct tax-relevant transactions. Operators are obliged to report users who perform at least 30 rental transactions a year or generate at least €2000 in annual income through the platform.
Stay clear of any potential tax woes by properly declaring your rental income and maximizing deductions. Consulting a tax advisor can help ensure compliance with all regulations.
Sources: ntv.de, awi/dpa.
- Taxables
- Income Tax Rates
- Tax-Free Threshold
- Deductible Expenses
- Depreciation
- Reporting Rental Income
- Additional Taxes
- Property Taxes
Enrichment Insights
- Income Tax: In Germany, income tax rates are progressive, beginning at 14% and increasing up to 45%, depending on your income level.
- Tax-Free Threshold: For smaller amounts, there is a tax-free threshold. However, renting out living space and earning more than €520 annually makes the income taxable.
- Deductions and Expenses: You can deduct expenses related to the rental, such as maintenance costs, insurance, and any mortgage interest.
- Depreciation: If you own the property, you can claim depreciation, around 3% annually for new buildings.
- Reporting Rental Income: You must declare your rental income on your tax return, including any subletting income from secondary residences.
- Additional Taxes: Apart from income tax, you may face a Solidarity Surcharge, which is a 5.5% surcharge on income tax for high earners. There is also a municipal tax called Annual Property Tax (Grundsteuer), which varies by municipality and based on the assessed property value.
To ensure compliance with community policy and avoid potential tax evasion allegations when subletting, it's essential to disclose your rental income that exceeds €520 per year in your tax return if the income minus expenses exceeds €410. Additionally, for personal-finance management, it's crucial to understand the taxable income thresholds, available deductions like depreciation, and reporting requirements for rental income, which may also include vocational training expenses if you run your subletting business as a vocational activity.
